In the three (3) months leading to December of last year (2018), Kenya one of East Africa’s largest economy, secured $704.99 million (about 70.55 billion Kenyan shillings) in fresh loans from China. With this development, China has overtaken the World bank, to become Kenya’s single-largest creditor.
The latest data from the country’s treasury shows that the stock of debt owed China, hit $6.2 billion (620.60 billion Kenyan shillings) as at the end of last year, from the $5.50 billion in September of the same year, further cementing China’s influence on the East African country’s infrastructural projects.
Kenya’s loans from the World Bank’s International Development Association and International Fund for Agricultural Development which usually have preferential allowances or rates, dipped to $5.48 billion (548.38 billion Kenyan shillings) in December of 2018 from the $5.61 billion (561.69 billion Kenyan shillings) that was the case three (3) months earlier, thus putting the World Bank, below China.
While gross public debt crossed 5.27 trillion Kenyan shillings in 2018, data from the country’s Treasury, further shows a 15.27 percent growth of 698.36 billion Kenyan shillings from a year before.
The Budget Office which is a professional unit within the National Assembly, that advises MPs on budgetary, financial and economic matters, says in its latest report that “The emerging concern, is that the government’s appetite for borrowing seems unlikely to slow down any time soon. And this could eventually push debt towards unsustainable levels.” The Budget Office further stated that “It is important therefore, to ensure that money accrued from debt, is well utilized and any public investment inefficiencies are effectively addressed to ensure that debt-funded projects yield high economic returns.”
The President Uhuru Kenyatta administration has allegedly (according to Business Daily Africa) largely procured debt from China’s international capital markets (Eurobond) since 2014, to build the much needed roads, power plants, bridges, as well as the Standard Guage Railway (SGR).
Loans from China which come on preferential and semi-preferential allowances or rates, have seen the world power move past traditional multilateral creditors such as the Washington based World Bank, at a speed that is unprecedented.
Kenya’s ability to secure loans through the World Bank’s International Development Association and International Fund for Agricultural Development’s long-term and low cost credit window for Least Developed Countries, has continued to weaken. This is because Kenya upgraded its economy, to lower middle-income status in September of 2013.
This has led to the increase of Kenya’s reliance on China and the Eurobond, to raise capital to bridge the deficit in the annual budgets, partly due to shortfalls in Revenue.
Kenya’s loans from China between 2014 and 2018 nearly tripled, rising by $3.98 billion (398.32 billion Kenyan shillings) from $2.22 billion (222.27 billion Kenyan shillings) in December 2014. That amounts to an average of 99.57 billion Kenyan shillings a year in the 2014 to 2018 four-year period.
In December 2018, China accounted for 70.71 percent of Kenya’s total bilateral debt of $8.78 billion (878.45 billion Kenyan shillings). This means that for every 100 Kenyan shillings loan, that Kenya signed with its bilateral partners, 70 Kenyan shillings came from China.
