Kenya seeks more Chinese loans despite rising public debt

Kenya’s President William Ruto sought $1 billion more in loans from China yesterday, despite rising public debt that has now reached $70 billion in the Eastern African country, according to National Treasury figures for 2022/2023.

President Ruto was was one of a number of global leaders in Beijing to attend the tenth anniversary meeting of China’s Belt and Road Initiative, the ambitious plan that aims to connect Africa, Asia and Europe through massive infrastructure and energy projects.

A statement from Kenya’s State House Spokesman Hussein Mohammed said “the president will deliver a keynote address headlined ‘Digital Economy as a New Source of Growth’ at the High-Level Forum.”

“Additionally, the president will participate in a Kenya-China investors roundtable to emphasize Kenya’s standing as an investment hub for Chinese companies,” said the statement.

One of the signature BRI projects in Kenya is the Standard Gauge Railway line, which runs from the port city of Mombasa to the Rift Valley via the capital, Nairobi. It cost $4.7 billion dollars to build but has faced numerous challenges, including delays and a low uptake of its freight service.

The SGR which started operations in 2017, was initially intended to go all the way to neighboring Uganda to the west, as well as serving other landlocked countries in eastern and Central Africa. However, those plans were cancelled after Kampala pulled out and opted instead for partnership with a Turkish firm for the construction of its main line.

Kenya’s SGR was mainly constructed using Chinese banks loans and last week, Deputy President Rigathi Gachagua told a local radio station that the president will be asking Chinese officials “to repay the loans slowly, while also borrowing a little money to finish stalled road projects.”

“The Kenya SGR desperately needs cross-border expansion to make it a financially sustainable project. This is another key element in Kenya’s negotiation,” said economist Aly Khan Satchu.

“The SGR as is a dud. To make it sustainable it needs to connect Uganda’s oil to the sea and (Congo) minerals. Therefore, to take the SGR from a negative return on investment into a positive ROI, he needs to increase leverage,” added Satchu.

Kenya has been struggling with ballooning public debt, with $6 billion owed to Chinese creditors, according to national data. Some of the loans will mature in the 2023/2024 fiscal year, putting further pressure on the government. However, it’s not clear if President Ruto and his delegation will be granted a restructuring or extension of the interest payments.

“The Ruto administration pivoted quite violently away from China and back towards the West but has been so far been diligent in paying its Chinese loans and therefore will be leveraging its track record as it seeks concessions,” Satchu said.

Meanwhile, a weakening of the Kenyan shilling, high global fuel prices and the repayment of foreign debt have continued to dominate politics.

Domestically, Ruto has announced restrictions on foreign trips and asked all ministries to cut their budgets by more than 10% as he aims to reduce government spending. But his critics, mainly in the opposition, say the president himself has reneged on his promise by continuing to borrow heavily despite the economy struggling. EMMANUEL IGUNZA, NAIROBI, MDT/AP