Past construction works of the standard gauge railway. FILE PHOTO | NMG
Summary
- Kenya in May 2014 entered into a deal to borrow $3.233 billion loan (Sh324.01 billion) from China’s Exim Bank, comprised of $1.633 billion commercial loan and $1.6 billion concessional to build a 385km modern railway between Mombasa and Nairobi.
- The loan, whose interest is 3.6 percentage points above the six months average of London Inter Bank Offered Rate (Libor) which serves as an international benchmark, is to be repaid in 15 years with a grace period of five years.
Loan repayments to China will more than triple from July next
year as the five-year grace period that Beijing extended to Kenya in May
2014 for the standard gauge railway (SGR) funds comes to an end,
Treasury data shows.
Nairobi will pay Chinese
State-owned lenders nearly Sh82.85 billion in the year starting July
next year from Sh26.61 billion in the current year ending June, and
Sh36.24 billion the following year from July.
Kenya in
May 2014 entered into a deal to borrow $3.233 billion loan (Sh324.01
billion) from China’s Exim Bank, comprised of $1.633 billion commercial
loan and $1.6 billion concessional to build a 385km modern railway
between Mombasa and Nairobi.
The loan, whose interest
is 3.6 percentage points above the six months average of London Inter
Bank Offered Rate (Libor) which serves as an international benchmark, is
to be repaid in 15 years with a grace period of five years.
Treasury data tabled in the National Assembly last Wednesday
shows principal payments to Exim Bank of China — the main SGR financier —
will shoot to nearly Sh34.8 billion in the financial year 2019/20 from
Sh6.07 billion this fiscal year, and Sh8.39 billion in 2018-19.
Debt
redemption to China Development Bank, another key financier of Kenya’s
infrastructure projects, will surge to Sh18.27 billion in 2019/20 from
Sh757.76 million this year and Sh1.68 billion in the year which starts
in July.
President Uhuru Kenyatta’s administration has
largely contracted debt from China since 2014 to build much-needed
roads, bridges, power plants and the SGR.
This started
after Kenya became a lower middle income economy, locking her out of
highly concessional loans from development lenders such the World Bank
Group.
China’s influence on the country’s
infrastructure development, however, started in earnest with
construction of the Thika Superhighway between January 2009 and November
2012 at a cost of nearly Sh32 billion during the last term of President
Mwai Kibaki.
The deal to fund the first phase of the
SGR, Kenya’s single largest infrastructure project by cost since
independence, saw Beijing overtake Tokyo as Kenya’s largest bilateral
lender.
Construction of the Mombasa-Nairobi SGR cost
about Sh692 million per kilometre (km), while the $1.5 billion for the
extension to Naivasha is estimated at about Sh1.28 billion per km.
Passenger
fares on the SGR are set to rise to Sh1,000 a seat, from the
promotional Sh700 during the launch last June, to help cover the costs
of the SGR line operated by China Communications Construction Company.
Debt
repayments (Sh82.85 billion) to Beijing will account for a third of the
Sh274.24 billion that Kenyan projects will be due to foreign lenders in
2019-20.
This will rise to nearly Sh95.2 billion in
2020-21 and Sh120.12 billion in 2021-22, assuming the debt obligations
to Beijing will remain constant even with contraction of new loans from
Beijing, the Treasury data shows.
China’s
debt stock to Nairobi has since surged nearly two and a half times to
$5.2 billion (Sh521.38 billion) by last December from $2.22 billion
(Sh222.60 billion) in January, dethroning the World Bank Group as
Kenya’s largest lender.
Consultancy Deloitte said in
the Africa Construction Trends Report 2017, released in Nairobi last
February , that China was the “most prolific funder of large-scale”
projects, building one in four projects in East Africa.
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