The People’s Republic of China has halted all further paying out of active loans to and for projects in Kenya. The decision is as a result of the Kenyan government’s attempt to extend its debt repayment reprieve to up to December of the year; 2021.
According to Business Daily Africa projects which are being funded by China, are experiencing financial slowdowns with a number of contractors making reports with regards to delayed payments from banks like the Exim Bank of China.
Executives at state owned establishments state that the affected projects might experience delays as a result of the present situation with funding.
Business Daily Africa says that sources who are familiar with the situation in question made it known that the lenders from China especially the Exim Bank of China, are not comfortable with the terms of the request by Kenya for an extension of the debt service suspension from June 2021 to up to December 2021.
A Chief Executive Officer (CEO) of a corporation owned by the Kenyan government under the condition of speaking with anonymity stated that, “Payment to contractors working on Chinese projects and paid under direct method have delayed since last month. We are told Chinese banks are not settling invoice because of the moratorium.”
The direct method being referred to has to do with the Kenyan companies who make use of loans from China, sending notices regarding supplier payments to Chinese banks via the Treasury.
The People’s Republic of China is one of the largest foreign creditors to Kenya. As at April of 2021, it had provided a total of 758 billion Kenyan Shillings to Kenya for the construction of roads, rail lines, as well as other infrastructural projects carried out over the past ten (10) years.
The Chinese embassy in Nairobi, Kenya had on Friday the 2nd of July 2021 confirmed the current funding situation. It stated that the matter is being addressed by officials of the two countries involved.
In an email response to Business Daily Africa regarding the delay in release of loans the Chief of Information and Public Affairs section at the embassy; Huang Xueqing stated that, “To my knowledge, the relevant parties of the two sides are in close communication on specific issues under the DSSI framework.”
Huang Xueqing added that, “They are in communication with each other on this matter also under the framework of DSSI (Debt Service Suspension Initiative (DSSI).”
The officials at the Kenya Treasury denied that there are any delays in the release of the loans from China and stated that the East African nation of Kenya has been able to get positive responses from all the countries where it has looked to get an extension of the debt repayment reprieve.
The Finance Cabinet Secretary; Ukur Yatani said it is “Not true.”
The Director of the Public Debt Management Office; Haron Sirma stated that, “I am not aware. All creditors have been very responsive.”
In January of 2021 China along with other powerful nations who are part of the Debt Service Suspension Initiative (DSSI) provided Kenya with a debt repayments reprieve period of six (6) months.
The Coronavirus pandemic which is still ongoing all over the world had a severely negative impact on the collection of tax revenue in Kenya. The negative impact occurred at a time when the period for repaying a number of the nation’s loans had arrived, even as it was battling with a somewhat widening gap in fiscal deficits.
Kenya is now looking to secure deals to halt the debt service with the powerful nations under the Paris Club along with other creditors including the People’s Republic Of China, for the six (6) months until the end of December 2021.
The G20 countries which include the United States of America (USA), Spain, the Republic of Korea, Japan, Italy, Germany, France, Denmark, Canada, and Belgium rescheduled the payments of 32.9 billion Kenyan Shillings in principal and interests due between January 2021 and June 2021, to the next four (4) years with a grace period of one (1) year.
The International Monetary Fund (IMF) revealed not too long ago that Kenya had wanted an extension of the debt repayment reprieve from G20 countries to up to December 2021, saving 361 million United States Dollars (39 billion Kenyan Shillings) in the process.
Although The People’s Republic Of China is a member of the G20 and also a signatory to the deal, a significant portion of its loans to East African nation of Kenya have been carried out on a commercial basis by government owned banks like the Exim Bank of China and the China Development Bank, government agencies, and quasi-public corporations.
The People’s Republic Of China has made an attempt to separately negotiate its debt relief agreements, while also applying the same terms as the G20 nations and reserving the right with regards to which particular loans will attract the moratorium, as well as size.
An estimate by the World Bank revealed that Kenya could possibly save as much as 55.9 billion Kenyan Shillings from China alone between January 2021 and June 2021 in principal and interest payments halts under the Debt Service Suspension Initiative (DSSI) deal.
However China made it known that Kenya will be granted a relief of 245 million United States Dollars (26 billion Kenyan Shillings).
It is not yet clear just how much debt reprieve the Kenyan government was requesting for and what particular loans were being waived. Disclosures by the Parliament did reveal that a portion of the reprieve came from the Exim Bank of China which finances the Standard Gauge Railway (SGR).
According to Business Daily Africa the administration of President Uhuru Kenyatta has since 2014 secured a large amount of its loans from China for the construction of bridges, roads, the Standard Gauge Railway (SGR), and of course power plants.
This switch occurred after the East African nation of Kenya became a lower middle income economy. The classification made it impossible for it to access the highly concessional loans from development lenders like the World Bank.
However the influence of The People’s Republic Of China on the infrastructure in Kenya really began between January of 2009 and November of 2012 with the construction of the Thika Superhighway at a cost of around 32 billion Kenyan Shillings during the last term of President Mwai Kibaki.
With the deal to cater financially for the first phase of the Standard Gauge Railway (SGR) which is the single biggest infrastructure project by cost in Kenya since independence, saw The People’s Republic Of China overtake Japan as Kenya’s biggest bilateral lender.
How informative was this article? Are there any other news topics, categories, or How To topics, that you would like us to write on? Feel free to reach out to Mpesa Pay in the comment section.
