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Kenya’s Struggles to Repay China Exim Bank Loan Hint at Wider Troubles

Kenya is struggling to make payments on a $156.7 million Chinese Exim Bank loan that financed Nairobi’s Southern Bypass road. The country’s auditor general, Nancy Gathungu says Kenya now owes the Chinese state bank $31.3 million in delayed payments for the period up to 2021.
 
Kenya’s next election is scheduled for August 9, and it is becoming a vote on President Uhuru Kenyatta’s legacy of debt-financed infrastructure building, much of it built and financed by China. This is especially true for the controversial Standard Gauge Railway (SGR). Up to May 2020, the SGR made an operating loss of $188.8 million, which has to be covered by taxpayers.
 
The opposition party candidate Raila Odinga is running on a promise to renegotiate Kenya’s Chinese debt. Speaking at Chatham House in London on March 16, he said he’ll assemble a tough team of negotiators: “It depends on how you negotiate with the Chinese. If you don’t have negotiators they will of course impose their terms on you.”
 
However, Chinese creditors are notoriously resistant to renegotiating loan terms, and Chinese debt isn’t Kenya’s only problem. Bilateral debt with China only makes up 9% of Kenya’s total debt portfolio. Repayment pressures come as Kenyan taxpayers are straining under a weak currency, yawning trade imbalances, and rising inflation, which have all been made worse by the war in Ukraine.

Background: Kenya’s National Debt

  • CHINA’S SHARE OF DEBT TO DECREASE: China’s overall share of Kenya’s debt is steadily decreasing now as the Treasury makes regular payments to China Exim Bank and the country’s total public debt continues to increase.

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