China may seize Kenyan assets, foreign debt hits more than $36 billion

Nairobi: Accumulated Chinese loans nearly pushed Kenya into default and Beijing could seize Kenyan assets if it failed to pay its debts. Since 2014, Kenya has been taking huge loans from China to fund its infrastructure projects such as roads, clean power plants and its largest project, the Standard Gauge Railway. Kenya’s external debt reached $36.4 billion in June 2022, according to data from the Central Bank of Kenya, Financial Post reported. China, which accounted for about a third of Kenya’s foreign debt service costs in 2021-2022, is the country’s largest foreign creditor after the World Bank. Kenya spent a total of Ksh 117.7 billion (USD 972.7 million) in Chinese debt over the period, of which approximately Ksh 24.7 billion (USD 204.1 million) in interest payments and nearly Ksh 93 billion (USD 768.5 million). ) in repayments.

Kenya’s Treasury estimates that debt repayments to the Exim Bank of China will reach $800 million in the coming fiscal year, an increase of 126.61% from the revised $351.7 million budgeted for 2022, it said. reports Financial Post. Despite China’s frequent denial of pushing the developing countries of Afro-Asian nations into debt trap, Kenya is the newcomer to the list of defaulting countries. In addition, Chinese banks fined Kenya Ksh 1,312 billion (USD 10.8 million) for defaults in the year ended June. Kenya has defaulted on the repayment of the Chinese loans taken out for the construction of the standard gauge railway (SGR).

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The deal to fund the first phase of the SGR, Kenya’s largest infrastructure project since independence, saw China overtake Japan as Kenya’s largest bilateral lender. But the initial cheer has turned into instability, Financial Post reports. The default came a year after Kenya had requested an extension of the moratorium on debt servicing bilateral lenders, including China, for another six months. But the lenders, most notably the Exim Bank of China, did not respond to Kenya’s request for a debt service vacation, sparking a stalemate that delayed disbursements to projects funded by Chinese loans, Financial Post reported.

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