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· . Kenya owes Sh693 billion in loans to China as on December 2019 with more than half of loans attached to the construction of the standard gauge railway (SGR)
· Chinese side justified its stand by saying that being part of the G20 initiative it does not want to be seen doing separate deals with individual countries
Kenya’s efforts to seek debt relief from China have hit a road block after China cited its membership of G20 that has attached tough conditions for freezing loan repayments by poor nations. Kenya owes Sh693 billion in loans to China as on December 2019 with more than half of loans attached to the construction of the standard gauge railway (SGR). This year alone, the Treasury has to pay Sh95 billion in interest and principal instalments on account of various loans to the Chinese government, Chinese Exim Bank and the China Development Bank.
Kenya has been negotiating with China for debt relief to free up funds to fight the Covid-19 pandemic. The Chinese side justified its stand by saying that being part of the G20 initiative it does not want to be seen doing separate deals with individual countries such as Kenya.
The G20 in April agreed to suspend payment obligations on bilateral debt owed by their least developed counterparts through the end of the year. Kenya initially turned down the G20 initiative, on the grounds that the terms of the deal were too restrictive and may impact Kenya’s credit rating. It was concerned about the terms of the deal limiting countries’ access to international capital markets during the standstill and felt that it could impact Kenya’s ability to finance its deficit later in the year. Instead Kenya tried to engage creditor countries including China individually with the goal of securing moratoriums on debt service payments lasting around a year with little conditions. In view of the turning down by China, Kenya has reverted to G20 offer.
G20 debt relief that has the potential to save Kenya $802.6 million in debt servicing this year covers only official bilateral debt, and also calls for the voluntary participation of private lenders on comparable terms. Kenya can only be part of the G20 initiative if private lenders like the Eurobond are part of the debt relief efforts.
