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Kenya to start repaying loans from China in July

BUSINESS
By Dominic Omondi | June 2nd 2021

A section of the Standard Gauge Railway (SGR) near Kitengela on Mombasa Road on August 27, 2020. [Elvis Ogina, Standard]

Kenya will have to put together Sh96.7 billion as debt payment to China Starting next month, including the first installment for the Nairobi-Naivasha phase of the Standard Gauge Railway (SGR).

This follows the end of the six-month debt repayment holiday that Kenya received under the auspices of G-20, a group of wealthy countries.

Kenya was from January 21 supposed to start repaying the Sh162 billion China loan used to build the Nairobi-Naivasha SGR line. 

In a report on the country’s external debt obligation, Treasury had disclosed that $1.482 billion (Sh162 billion) debt from the Exim Bank of China that Kenya tapped in December 2015 had fallen due after a five-year grace period with the country expected to make 30 semi-annual payments for the next 14 years.

However, China, Kenya’s largest bilateral lender, gave Treasury a debt repayment holiday of Sh30 billion, including the first payment for the second phase of the SGR from Nairobi to Naivasha, according to a mini-Budget prepared by Treasury.

All the savings that Kenya made from China were sourced from the Exim Bank of China. China Development Bank, also a key lender, however, stayed away from the Debt Service Suspension Initiative (DSSI) under the G-20 framework.

Kenya has been pushing for the extension of the debt repayment holiday to June 2022, with the Central Bank of Kenya Governor Patrick Njoroge being the latest to add his voice to this push.

“We should add that G20 has committed to consider if they could extend the DSSI beyond June 2021. They will consider it in April in the context of the IMF-World Bank spring meetings,” Njoroge said during a post monetary policy committee (MPC) briefing last week.

By end of the current financial year ending this month, Kenya is expected to pay Exim Bank Sh42.5 billion in principal and interest after the Chinese lender gave the country a moratorium on debt payment.

This year will also see Kenya begin to repay the Sh162 billion loans for the Naivasha-Nairobi SGR, which was to fall on January 21. This loan was to be repaid in 30 equal installments ending July 21, 2035.

Kenya also received a debt repayment moratorium from some 10 Paris Club member countries that will defer payment for Sh32.9 billion that was due to them between January and June this year.

Other countries that have extended debt repayment to Kenya are Italy, which has rescheduled loans amounting to Sh6.9 billion, France (Sh4.3 billion), Spain (Sh3.2 billion), Japan (Sh2.4 billion), and Germany (Sh1.7 billion).

Treasury Cabinet Secretary Ukur Yatani will borrow Sh1.63 trillion to finance the Budget. Kenya is expected to spend Sh3.63 trillion in the 2021-22 financial year.

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