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China, World Bank set to give Kenya Sh150 billion

By Dominic Omondi | Jun 15th 2018 | 3 min read
Treasury CS Henry Rotich addresses a press conference after reading the 2018-2019 Budget at Parliament on Thursday 14/06/2018. [Boniface Okendo,Standard]

The World Bank and China will fund a chunk of Kenya’s development projects, including the building of roads, railways, hospitals and schools.

The two will contribute more than half, or Sh150 billion, of an estimated Sh280 billion that Kenya expects from external lenders. These funds will come in form of loans and grants.

Apart from the Sh280 billion, the Government will plug the deficit of around Sh609.8 billion the National Treasury has projected in the budget presented yesterday using domestic loans.

The World Bank and the International Monetary Fund (IMF) will remain Kenya’s leading external financiers. However, their position is being increasingly threatened by China.

The Energy and Housing departments will receive Sh5.3 billion and Sh4 billion respectively from the Washington-based lenders.

Infrastructure development

Much of WB’s financing, about Sh16 billion, will be used for development, particularly of infrastructure.

Kenya expects to receive Sh78 billion from the two lenders. But they have not been sitting pretty at the top, with China, which is grabbing most of the infrastructure projects including the Standard Gauge Railway that will cost the country more than Sh1 trillion by the time it reaches Malaba town in Busia County.

China, by far Kenya’s largest bilateral lender, is expected to pump in about Sh71 billion. A significant portion of the money, all of it in loans, will be channelled to the transport sector, including construction of the second phase of the SGR from Nairobi to Naivasha.

While about Sh50 billion of Chinese funds will be used to build the SGR, part of the funds will also go into education, skills development and health.

The State Department for Vocational and Technical Training will receive Sh3 billion while the Ministry of Health will get Sh7 billion. Another Sh3 billion will go to the State Department of Energy.

Tightening grip

As of 2017, China had extended about Sh165 billion to Kenya, tightening its grip as the country’s largest bilateral lender. China now controls 66 per cent of the total bilateral loan.

The world’s second largest economy will control close to half of the Sh146 billion that Kenya expects to receive from bilateral lenders.

“In bilateral debt category, debt from the People’s Republic of China grew by 52.8 per cent to Sh478.6 billion, accounting for 12.1 per cent of the total national government’s debt position,” said the the Kenya National Bureau of Statistics (Kebs) in its 2018 Economic Survey.

Italy is a surprise entrant into the exclusive fold of bilateral lenders, with the Government expecting about Sh22 billion from the European country. Italy will give the country’s defence ministry Sh7.3 billion and ICT about Sh7.2 billion.

The other major external financiers in the next financial year include African Development Fund (Sh22 billion), Global Fund (Sh15.4 billion), France (Sh13.8 billion) and Japan (Sh10.2 billion).

Global Fund, which finances the war against HIV, malaria and tuberculosis, is another significant external lender, and the Government expects to receive a grant of Sh15 billion from it.

Treasury Cabinet Secretary Henry Rotich yesterday announced an unprecedented budget of Sh2.55 trillion, with the external lenders expected to finance most projects through loans and grants.

But Treasury's expectations might be frustrated by a number of factors including the fact that donors may not give all the promised funds, particularly grants, which are estimated to be around Sh47 billion.

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