Kenya’s Loan Repayment to China To Increase By 129.0%

Kenya’s loan repayment to China is set to increase by 129.0 percent in the fiscal year 2019/2020 according to the Treasury’s program-based budget of the National Government of Kenya.

According to the estimate, the loan repayment to an estimated 82.9 billion shillings from an estimated 36.2 billion shillings in the financial year 2018/1, as the grace period that had been extended to Kenya for the Standard Gauge Railway (SGR) loan comes to an end.

Principal payments for the loan to the Kenyan Government from the Export-Import Bank of China of USD 3.2 billion to build Phase I of the SGR, are set to increase by 36.1 percent to 8.3 billion shillings in financial year 2018/19, and 34.8 billion shillings in financial year 2019/20, from 6.1 billion shillings this financial year as the grace period extended comes to an end.

The loan comprised of a:

1. USD 1.6 bn semi-concessional loans at an interest rate of 2.0 percent paid over 20-years, with a grace period of 7-years.
2. USD 1.6 billion commercial loans at an interest rate of 3.6 percent above the prevailing 6 month-LIBOR, paid over 15-years, with a grace period of 5-years.

The increase in the loan comes at a time when the World Bank, in its Pulse Report, raised concerns over the rising public debt levels in Sub-Saharan Africa, citing the composition of debt has changed, as countries have shifted away from traditional concessional sources of financing toward more market-based ones.

Higher debt burdens and the increased exposure to market risks raise concerns about debt sustainability.