The World Bank loans are now more than all of Kenya’s bilateral loans combined, which stand at Kstitle

Publicado em 20 de março de 2022, por COMPMGG

The World Bank loans are now more than all of Kenya’s bilateral loans combined, which stand at Kstitle

The accumulation of Chinese debt has caused anxiety among analysts and activists in recent years as the loans increased to hundreds of billions of shillings in just a few years while its repayment terms are not made public.

The most notable project funded by the Chinese is the standard gauge railway (SGR), whose commercial viability has been the subject of intense scrutiny.

But for nearly four years now, Kenya has abandoned expensive commercial debt to cut back on ballooning repayments while the Covid-19 pandemic squeezed revenue collection.

As part of that strategy, it has secured hundreds of billions from the IMF and World Bank, a key plank being direct lending for the budget to top up the public purse for items like paying civil servants salaries.

Under the administration of former President Mwai Kibaki, Kenya kept away from this type of credit, with most of the support from institutions like the IMF and the World Bank coming in the form of project support.

The shift followed a deteriorating cash flow situation, marked by falling revenues, worsening debt service obligations, and the effects of the Covid-19 pandemic.

09 trillion ($9.5 billion) from countries like China, Belgium, the US, France, Japan, Germany, Austria, Spain, Italy, Finland and Denmark.

This has offered the World Bank and IMF influence on Kenya’s economic policy planning that would require the government to implement tough conditions across many sectors, including a freeze in civil servants’ pay and the imposition of new taxes.

Total debt stands at 70 percent of gross domestic product (GDP), up from about 45 percent when he took over — a surge that some politicians and economists say is saddling future generations with too much debt.

The shifting lending trends emerged as China signalled a reduction in loans to Kenya and other African countries in coming years after it cut financial commitment to projects in the continent as much as a third in the next three years

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President Xi Jinping, in December, at the Forum on China-Africa Cooperation (FOCAC), pledged to invest $40 billion in African countries for three years.

That represents a percent drop from the $60 billion the world’s second-largest economy has committed to African countries in the last two FOCAC summits, which take place every three years.

Lower funding to Africa, research economists say, could be a pointer that Beijing is starting to see signs of reduced benefits from the cash it commits to the continent.

Typically, World Bank loans have zero or very low-interest rates and have repayment periods of 25 to 40 years, with a five- or 10-year grace period

China’s influence on Kenya’s mega projects development started gathering steam with the construction of the Thika Superhighway between for nearly Ksh22 billion ($281 billion) in the last term of President Kibaki.

China Road and Bridge Corporation, a subsidiary of China Communications Construction Company, has since bagged the lion’s share of Kenya’s mega projects – at least two railways, two ports and road projects.

The plan to cut cash flows – which largely come in form of credit lines, investment and trade finance – comes in the wake of rising indebtedness by African countries, worsened by economic fallout emerging from the pandemic.

Countries such as Zambia have struggled to service external debt in recent years and became the first one to default on Eurobond while Ethiopia’s risk of default has heightened on the back of unfolding civil war which has hurt economic prospects.

Kenya, on the other hand, was forced to drop a bid to extend debt relief with Beijing beyond June after Chinese lenders, especially Exim Bank, opposed the deal reached by the world’s richest countries under the Debt Service Suspension Initiative framework.

This followed a stand-off that had seen Chinese financiers delay disbursements, resulting in a cash crunch for Chinese-funded projects in June.