In Summary
  • The Treasury spent Sh12.72 billion on servicing loans from China in the July-September period its statistics show, accounting for 48.26 per cent of what the country used on servicing foreign debt.
  • The amount paid to Nairobi’s largest bilateral lender represented 70.69 per cent of the Sh17.99 billion total repayments to bilateral creditors in that period, Treasury data indicates.
  • Repayments to China were second to World Bank Group’s International Development Association (IDA), the country’s largest multilateral lender, which got Sh3.906 billion, while commercial banks were paid a cumulative Sh3.120 billion.

Beijing gobbled up nearly half of cash Nairobi spent on external debt repayment in three months ended September 2017, hinting at the cost of loans China has been injecting into the country’s infrastructure development.

The Treasury spent Sh12.72 billion on servicing loans from China in the July-September period its statistics show, accounting for 48.26 per cent of what the country used on servicing foreign debt.

The amount paid to Nairobi’s largest bilateral lender represented 70.69 per cent of the Sh17.99 billion total repayments to bilateral creditors in that period, Treasury data indicates.

Repayments to China were second to World Bank Group’s International Development Association (IDA), the country’s largest multilateral lender, which got Sh3.906 billion, while commercial banks were paid a cumulative Sh3.120 billion.

Kenya’s debt obligations to France amounted to Sh1.88 billion with Japan getting Sh1.28 billion in the review period, Treasury secretary Henry Rotich says in the latest quarterly Economic and Budgetary Review report for the period ended last September. President Uhuru Kenyatta’s administration has largely contracted debt from China as well as international capital markets and multilateral lenders such as African Development Bank since 2014 to build much-needed roads, bridges, power plants and the standard gauge railway. Total public debt hit nearly Sh4.59 trillion last November, Central Bank of Kenya statistics show, from Sh3.75 trillion a year earlier, Sh3.08 trillion in November 2015 and Sh2.39 trillion 12 months before.

The bulk of the debt accumulated in recent years has been foreign loans, which made up 51.4 per cent of the total debt last November at Sh2.36 trillion – Sh140 billion shy of the Sh2.5 trillion limit passed by the National Assembly in December 2014.

The Treasury has budgeted for Sh658.2 billion, or 45 per cent, of projected Sh1.44 trillion tax revenue for payment of domestic and external loans in the current financial year which ends in June. The space for Nairobi to borrow through World Bank’s IDA’s long-term, low-cost credit window for Least Developed Countries (LDC) has been diminishing since 2015.

“Kenya continues to record declining levels of concessional debt and build-up of commercial and semi-concessional borrowing since its elevation to a lower middle income economy status in September 2014,” the Central Bank of Kenya has reiterated in its latest Quarterly Economic review report for the July-September 2017 period.

Loans from IDA and International Fund for Agricultural Development (IFAD), which are usually long-term and concessional, stood at $5.13 billion (Sh517.05 billion) last September, 18.22 per cent growth over $4.34 billion (Sh437.43 billion) the year before.

There has been sharp rises, however, in loans procured from foreign commercial banks and China since the economic rebase in September 2014.

The debt that Kenya owed banks abroad was $6.86 billion (Sh691.42 billion) in September 2017, reflecting a 230.98 per cent jump over $2.07 trillion (Sh208.64 billion) three years ago when the IDA’s concessional credit door started shutting for Nairobi.

Debt contracted from Beijing climbed more than four folds to $4.733 billion (Sh477.04 billion) from $922.30 million (Sh92.96 billion) in the review period three years earlier.

Loans from China largely have concessional and commercial portions. The spike in debt contracted from China underlines the active participation of the East Asia’s powerhouse in Kenya’s infrastructure development-led growth strategy.

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