China has granted Kenya a 27 billion shilling ($245 million) debt relief to which was due from January through June as the country struggles to put the economy in order after the effects of the ongoing Covid-19.
“We are happy to announce that our engagement with China where we held about Ksh.27 billion in payments falling due between January and June,” Treasury Cabinet Secretary Ukur Yatani said. “The net impact of this relief is an opportunity and break on the kind of liquidity we desire.”
Despite calls on the country to cut down on her roaring appetite for both domestic and foreign loans, CS Ukur Yatani seemed to imply that the borrowing will continue because our “debt position is highly sustainable.”
“Kenya’s debt position is highly sustainable. We have never defaulted on payments. The fact that we have never defaulted and are in good books and continue attracting as many resources as possible is something to be happy about,” he said.
The first installment of a US$1.48 billion loan from the Export-Import Bank of China – used to build the Nairobi to Naivasha standard gauge railway, is due on Thursday.
Kenya’s rapidly accumulated debt stock from the ramping up of infrastructure projects is fairly evenly split between domestic and external debt. Interest payments represent a sizeable 22 percent of tax revenue in 2018/19, compared to only 14 percent in 2012/13.
Chinese loans comprise 21 percent of Kenya’s external debt at the end of June 2020, compared with the World Bank’s 25 percent. Sovereign bondholders hold another 19 percent, commercial banks 11 percent and the African Development Bank 7.5 percent.
Kenya’s debt is said to be at 10.4 trillion shillings, way above the ceiling set by the Senate at 9 trillion shillings. There is a push to have the ceiling lifted and pushed to 12 trillion shillings. With the borrowing appetite of the current regime, 12 trillion ceiling is nothing.