Shocking! China overtakes Japan and now controls this per cent of Kenya’s bilateral debt

Image result for kenya chinese loans
Chinas debt to Kenya increased by 52.8 per cent to Sh478.6 billion in 2017 from Sh313.1 billion in 2016, stretching its lead as the countrys top bilateral lender.
The Asian country now controls 66 per cent of Kenya’s total bilateral debt, which stood at Sh722.6 billion as at June 2017.

China’s s debt to Kenya has increased more than seven times from Sh63 billion in 2013 largely due to increased interest in the development of the country’s infrastructure, with the game changer being the construction of the Standard Gauge Railway.

Kenya spent over Sh440 billion on the SGR from Mombasa to Nairobi with plans to pump a total of Sh1 trillion into the railway by the time it terminates at the border town of Malaba.Image result for kenya chinese loansThe new railway’s financing pushed up China’s debt stock from Sh252 billion in 2015 to Sh465 billion in 2016.

The world’s second-largest economy has for the past few years tightened its grip on Kenya’s future overtaking Japan which was until 2013, the leading bilateral lender.

By 2010, China had lent Kenya a paltry Sh14 billion, trailing Japan (Sh62 billion). However, as at June 2017, Japan’s loans to Kenya stood at Sh91.4 billion compared to China’s Sh722.6 billion.

Image result for port of mombasa

Kenya now risks losing the port of Mombasa to China’s Exim Bank should the government default on paying loans.

A letter by Auditor General to Kenya Ports Authority (KPA) reveals that port’s assets were charged as security to secure loans but KPA did not disclose this guarantee in the financial statements.
Edward Ouko’s office says that KPA assets are exposed since the Authority signed agreement where it has been referred to as borrower under clause 17.5 of the loan agreement and any proceedings against its assets by the lender would not be protected by sovereign immunity.
“The agreement is biased since any non-performance or dispute with the China Exim bank would be referred to arbitration in China, whose fairness in resolving the disagreement may not be guaranteed,” reads the auditor’s letter signed by F.T Kimani for the Auditor General.
SEE ALSO :Kenya to export agricultural products to China

Image result for train gif

“KPA did not disclose these guarantee in the financial statements,” says the letter.
KPA’s statements of profit and loss and other comprehensive income reflected operating revenue of Sh42,736,520,000 being an increase of Sh3,132,843,00 from Sh39,603,677,00 in the year ended June 30 last year.

China’s debt stock is almost certain to increase further this year as construction of the Standard Gauge Railway (SGR) enters its second phase, with Kenya said to have borrowed a further Sh165 billion for the extension of the railway line from Nairobi to Naivasha.
Kenya, which spent over Sh440 billion on SGR from Mombasa to Nairobi, is expected to pump a total of Sh1 trillion into the railway by the time it terminates at the border town of Malaba.

How can Kenya save itself from this trap?

Leave a Reply

Your email address will not be published. Required fields are marked *