China Warning Sign Prompts Kenya to Resume Full Debt Repayment

  • Kenya has recalled a request it had previously made to China – asking for a postponement of the infrastructure loan repayment to December 2021. 

    The Business Daily quoted its sources indicating that the decision was made after China indicated it would stop loaning Kenya if the debt service agreements were not honoured as agreed in the contracts. 

    The National Treasury sought the first postponement in 2020 – citing the economic aftershocks of the Covid-19 pandemic. The request was approved in January 2021 – requiring servicing to resume in June 2021. 

    Chinese nationals at work during the construction of the SGR.
    Chinese nationals at work during the construction of the SGR.

    The agreement was that the debtors would adhere to a 6-month debt relief period allowed by China and other G20 nations. This was approved and signed under the Debt Service Suspension Initiative (DSSI).

    On July 2, 2021, China froze the disbursement of funds to projects being undertaken in Kenya.

    The move was interpreted as China’s Exim Bank subtle warning and expression of its displeasure to Nairobi seeking to extend debt relief from June to December 2021.

    Kenya’s request for an extension for relief was revealed by the International Monetary Fund (IMF).

    However, the  Chinese embassy in Nairobi described the funding incident as a hitch that was quickly resolved.

    National Treasury PS Julius Muia has now assured stakeholders that Kenya would not pursue an extension of debt relief any further.

    He further affirmed that the country was paying Exim Bank of China as stipulated in the Debt Service Suspension Initiative (DSSI).

    As of April 2021, the communist republic had lent  Kenya a total of Ksh758 billion for infrastructure projects including the Ksh327 billion Mombasa-Nairobi Standard Gauge Railway (SGR). 

    In April, President Uhuru Kenyatta called for debt forgiveness as a means to cushion countries that are severely affected by the Covid-19 pandemic. He was speaking at a meeting organised by the Organization of African, Caribbean, and Pacific States (OACPS)

    A file iumage of the National Treasury
    The National Treasury offices at Harambee Avenue, Nairobi