Kenya paid $256m to China to ease impasse over debt repayment: reports

Through East Africa

Kenya wired $256.9 million to China in the quarter ending September 2021 to ease a standoff over debt repayments that delayed disbursements for projects funded by Chinese loans.

Treasury documents reveal that Kenya paid the millions at a time when Chinese lenders, particularly the Exim Bank, had opposed Kenya’s request for a debt repayment holiday.

Kenya has requested an extension of the moratorium on debt repayments from bilateral lenders, including China, for another six months until December 2021, thereby sparing it from committing billions to Beijing lenders.

The moratorium started in January 2021.

China postponed repayments in January, helping Kenya temporarily retain $239.1 million that was due for six months ending June 30.

Opposition from Chinese lenders forced Nairobi to abandon efforts to extend the debt repayment holiday to avoid straining relations with Kenya’s biggest bilateral creditor.


China, which accounts for about a third of Kenya’s external debt servicing costs in 2021-22, is the country’s largest foreign creditor after the World Bank.

Kenya plans to spend a total of $1.04 billion on Chinese debt over the period, including about $218.7 million in interest payments and nearly $823.4 million in repayments, according to budget documents.

G20 countries including Belgium, Canada, Denmark, France, Germany, Italy, Japan, Republic of Korea, Spain and the United States have rescheduled 291 payments, $3 million in principal and interest due between January and June over the next four years with a one-year grace period.

Kenya has requested an extension of debt relief from G20 countries until December, envisaging additional savings of $345.3 million.

Haron Sirima, the director general of the Public Debt Management Office at the National Treasury, said the response to Kenya’s request for G20 relief had been “positive”.

The Treasury report shows that repayment to other major bilateral creditors remained weak, signaling a temporary freeze.

For example, Kenya repaid $58,521 to France over the July-September period compared to $19.9 million a year ago and $6,374.50 to Japan compared to 454.16 million shillings previously.

Kenya has faced a deteriorating cash position marked by declining revenues, worsening debt service obligations and the effects of the Covid-19 pandemic.

It spent $882.96 million less than the cash it had originally budgeted for servicing external debt for the fiscal year ending June 2021, thanks in part to six-month debt relief.

Although China is a member of the G20 and a signatory to the agreement, much of its lending to Kenya has been provided on a commercial basis by government agencies, quasi-state corporations and state-owned banks such as China Development Bank and Exim Bank. from China.

China has sought to negotiate its debt relief deals separately, but applying the same terms as G20 countries while reserving the right to the size and loans that will benefit from the moratorium.

President Uhuru Kenyatta’s administration has taken out loans from China extensively since 2014 to build roads, bridges, power stations and the Standard Gauge Railway (SGR).

It started after Kenya became a lower-middle-income economy, excluding it from highly concessional loans from development lenders such as the World Bank.

The terms of China’s loan agreements with developing countries are unusually secretive and require borrowers to prioritize repayment to Chinese state-owned banks over other creditors. A cache of these contracts was revealed in an earlier Reuters report.

The dataset – compiled over three years by AidData, a US research lab at the College of William & Mary – includes 100 Chinese loan deals with 24 low- and middle-income countries, a number of which are struggling with debt. growing amid the economic fallout from the Covid-19 pandemic.

He revealed several unusual features, including confidentiality clauses that prevent borrowers from revealing the terms of loans, informal collateral agreements that benefit Chinese lenders over other creditors, and promises to keep debt out of debt. collective restructuring – described by the authors as “no Paris”. club clauses”.

The Paris Club is a group of officials from major creditor countries whose role is to find solutions to the payment difficulties of debtor countries.

Tana T. Thorsen