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Japan and China lead in financing Kenya's projects

Financial Standard

By Frankline Sunday | Aug 30, 2022

**Signage showing a project funded by the Japanese government in Kisii County.** [Sammy Omingo, Standard]

Japan and China are leading in the value of loans and grants that bilateral partners have lent to Kenya for the 2022-23 financial year.

This is according to the latest data from the National Treasury that indicates that the two Asian giants are involved in funding 24 mega infrastructure projects across the country.

China is directly pumping Sh29.4 billion while Japan has committed Sh31 billion in the current financial year to fund projects across several sectors that are at various stages of completion.

The stake of the two nations in Kenya's development projects further increases with the inclusion of indirect funding through entities such as the African Development Bank (AfDB) and the International Development Association (IDA) where China and Japan are among the leading contributors to the two funds.

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Some of the mega projects that China will be bankrolling in the near term include the construction of the Nairobi Western bypass at Sh5.2 billion, the Konza Data Centre at Sh3.6 billion and power generation and transmission projects valued at more than Sh24 billion.

Japan on the other hand has pledged Sh17.6 billion over the 2022-23 financial year in infrastructure projects in Mombasa County alone.

These include Phase 2 of the Mombasa Port Area Road Development Project (Sh5 billion), construction of the Mombasa Gate Bridge (Sh9.6 billion) and the Dongo Kundu Special Economic Zone (Sh2.5 billion).

Other countries that emerge at the top in direct loan and grant funding to Kenya in the current financial year include France (Sh21.1 billion), the United States (11.2 billion) and Germany (Sh10.1 billion).

Funding priorities for the German government include the Silali Geothermal Project in Lake Bogoria where the European economic powerhouse has pledged Sh3.8 billion. Others include components of the Kenya-South Sudan link road (Sh2 billion) and the Mombasa-Mariakani road (Sh2.1 billion).

The donor funds in the form of both loans and grants will be disbursed through State departments and agencies that serve as the implementing partners for the mega projects.

According to the data, the National Treasury ranks the top implementing partner and is set to directly receive Sh8.7 billion in grants and Sh23.4 billion in loans in the current financial year. This includes Sh7.7 billion towards capitalising the Kenya Mortgage Refinance Company (KMRC) from the IDA and another Sh4.6 billion from the AfDB towards the same.

Other commitments from the IDA through the National Treasury include Sh6 billion towards the Climate Action Programme and Sh3 billion under the Access to Finance and Enterprise Recovery Project which seeks to support SMEs affected by the Covid-19 pandemic.

The Ministry of Health is also among the high-ranking recipients of donor funds in the current financial year. Grant disbursements through the ministry that amount to Sh3.8 billion include Sh2.6 billion from the Global Alliance Vaccine Initiative for ongoing mass-vaccination efforts and Sh1.2 billion from the United Nations Population Fund.

Off-grid solar

IDA ranks top in funding commitments to Kenya's development projects and the absolute value of the country's outstanding external debt obligations.

In the 2022-23 financial year alone, the agency has pledged Sh85 billion towards projects in several sectors including healthcare, energy, infrastructure, education and climate resilience.

This includes Sh5.1 billion for the Ethiopia-Kenya Electricity Highway Project, Sh3.6 billion for the Kenya off-grid solar access project and another Sh3 billion for the Kenya Electricity Modernisation Project.

The latest figures from the National Treasury that cover the current financial year are just a snapshot of the varied sources of Kenya's external debt obligations that crossed the Sh4 trillion mark earlier this year.

According to the latest Public Debt Report from the National Treasury, Kenya's bilateral debt stood at Sh1.1 trillion as of June 2021 with China leading with Sh761 billion, followed by Japan at Sh159 billion, Italy at Sh40 billion and Germany at Sh36 billion.

In the previous financial year, the Treasury signed and guaranteed more than Sh293 billion in new loans and grants with repayment periods ranging from eight to 38 years.