Kenya debt to China hits Sh650b as SGR takes up more funds
SEE ALSO :Uhuru to open Naivasha SGR stationJapan, whose debt stock increased by Sh49 billion to reach Sh132.2 billion, remains a distant second. Japan -- currently hosting African Heads of States, including Kenya’s President Uhuru Kenyatta for the seventh Tokyo International Conference on African Development – TICAD VII -- has been scheming for a way to bounce back since Chinatrounced it as Kenya’s leading bilateral lender. Japan’s selling point has been “high quality” infrastructure, which it hopes will sway African countries back into its fold. China’s deep pockets that have seen it finance major infrastructural projects, such as Kenya’s SGR, have ensured that Africa remains in Beijing’s tight grip. China also surpassed the World Bank in 2017 to become Kenya’s leading creditor, after the country inked a Sh327 billion SGR project from Mombasa to Nairobi. During this period, the World Bank’s debt increased by nearly a similar value to China’s to hit Sh607.2 billion. This is after the global lender approved a $750 million (Sh75 billion) loan to Kenya for budget support towards the end of the 2018/19 financial year.
SEE ALSO :Why the NSE bell is no longer chimingMeanwhile, Kenya’s stock of expensive loans rose to 36 per cent of the total debt, from 24 per cent in June 2016. However, the fraction of cheap loans from multilateral institutions such as the World Bank declined from 45 per cent three years ago to 30 per cent. Commercial loans crossed the trillion-mark after the country successfully issued its third Eurobond, a dollar-denominated sovereign bond, from which it raised Sh210 billion. Part of the money was used to refinance another maturing Eurobond while the rest was to be used for budgetary support. Still sustainable The net effect of Kenya’s increased appetite for commercial loans has been a spike in interest payments, due to the harsh terms of these loans including shorter repayment period, high-interest rates, and little or no grace period. However, Treasury has moved to allay any fears over the increasing debt, insisting that the country’s debt is still sustainable. This is despite the International Monetary Fund(IMF) noting that the country’s risk of defaulting on debtrepayment had increased from low to moderate, citing a higher level of debt and reliance on non-concessional borrowing.
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