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Why Kenya is borrowing less from Japan

By Dominic Omondi | August 26th 2016

Resurgence of Chinese influence has relegated Japan to the third place in the list of Kenya's biggest bilateral lenders.

It is double blow for Japan after China also deposed it from its position as the second largest economy in the world after United States of America.

Japan's debt stock to Kenya now stands at Sh57.9 billion while China's is Sh465 billion while France's Sh67.9 billion.

China has won the hearts of successive Kenyan governments because of its deep pockets. This has seen it entrusted with the construction of almost every new road, rail and port in Kenya.

Most of these mega-projects have been done using borrowed cash from China. China overtook Japan in 2013 to become Kenya's first bilateral lender, when her loans to the country shot up to Sh63.1 billion against Japan's Sh47.6 billion by end of that year, according to figures from the National Treasury.

But the game-changer in the Sino-Japanese race was construction of the Standard Gauge Railway (SGR). With the inclusion of the Sh327 billion loan from China for the the country's biggest infrastructure project, Chinese debt dramatically shot up from Sh252 billion in 2015 to the current Sh465 billion against Japan's Sh57.9 billion as at June this year.

It was a sharp increase for a country which in 2010 had lent to Kenya a paltry Sh14 billion, trailing Japan (Sh62 billion), France (Sh28 billion) and Germany (Sh16 billion). Japan would continue holding the pole position until 2013 when China deposed it.

In 2013, Japan marginally beat France to the second position by about Sh200 million. The following financial year, even France raced past the Asian country as Kenya engaged France more with her ambitious energy projects.

It has not been the best of time for a country which, in the 1970s, enjoyed a blissful economic growth of over 20 per cent in what was described as Japanese economic miracle.

Even as the country continued to grapple with a biting economic recession that started in the early 1990s, it was hit by an earthquake in 2011 which destroyed its nuclear power plants and crippled a section of its economy.

Japan's best years were between Post-World War and the Cold War. Indeed in the 1970s, the country averaged a double-digit growth, giving Washington officials some sleepless nights as they sought to maintain America's position as the super power.

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