China’s repayment hits 42pc of Sh15.5bn foreign debt bill

The National Treasury building. Kenya’s debt to China stood at Sh262 billion in June last year, up from Sh82.9 billion a year earlier. PHOTO | FILE 

By DAVID HERBLING

In Summary

• IDA has given Kenya $4.89 billion (Sh503 billion) as at August while China’s stood at $3.08 billion (Sh317 billion).
• Kenya’s loans from its traditional foreign markets of Japan and France stagnated or declined.
• Kenya’s debt to China stood at Sh262 billion in June last year, up from Sh82.9 billion a year earlier and Sh14.7 billion ($146 million) in 2010.

The growing appetite for Chinese loans saw Kenyan taxpayers wire nearly half of foreign debt repayments to Beijing.
Data from the National Treasury shows that Kenya repaid China loans amounting to Sh6.42 billion, comprising a principal amount of Sh1.12 billion and Sh5.3 billion in interest.

This amounted to 42 per cent of the Sh15.5 billion foreign debt repayments for the quarter to September 2016. China has in recent years emerged as the leading source of bilateral aid amid murmurs of concern on the cost of its engagement with Kenya. In comparison, the country repaid the World Bank’s International Development Association (IDA) Sh4.81 billion, followed by France (Sh1.09 billion), and Japan Sh984.76 million. Chinese loans were the highest priced, according to the repayment figures provided by the Treasury. Kenya paid less to IDA compared to the Chinese despite the World Bank unit having lent more to Kenya than Beijing.

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Choking the economy

IDA has given Kenya $4.89 billion (Sh503 billion) as at August while China’s stood at $3.08 billion (Sh317 billion).

The World Bank warned that Kenya’s huge appetite for Chinese loans risks choking the economy on the huge repayment burden. A research paper by World Bank economists says Chinese loans to Kenya grew by 54 per cent per year between 2010 and 2014, with some of the credit having high interest rates.

In contrast, the paper said, Kenya’s loans from its traditional foreign markets of Japan and France stagnated or declined. The main borrowing pertains to the standard gauge railway funding.

Kenya’s debt to China stood at Sh262 billion in June last year, up from Sh82.9 billion a year earlier and Sh14.7 billion ($146 million) in 2010.

The Treasury has in the past said growing preference for external debt is due to cheaper or concessional terms with a grace period beyond six years.