Kenyan Debt from China Declines for the First Time in 20 Years

China to Kenya loans have decreased for the first time in 20 years following a measure by Beijing to reduce loans from Africa since the countries have reached a borrowing limit.

According to data from treasury, Chinese lending decreased to $6.83 billion in June from $7.05 billion in May and $3 billion in 2016.

The unusual drop in Chinese debt comes at a time when the World Bank and the International Monetary Fund (IMF) have increased lending to Kenya, strengthening the institutions’ hold on the country’s economy.

Over the last decade, Nairobi has been a major beneficiary of Chinese loans for the development of mega infrastructure such as roads and a modern railway, making Beijing the largest bilateral creditor since 2015.

In 2020, the IMF identified more than 20 African countries, including Kenya, as being in or at risk of debt distress.

In a video speech to the triennial Forum of China-Africa Cooperation in Senegal in November 2021, Chinese President Xi Jinping reiterated that caution.

The Chinese president announced that his nation would reduce its overall financial assistance to Africa by a third, to $40 billion, over the course of the following three years. He also suggested that lending would be redirected away from large infrastructure in favor of SMEs, green projects, and private investment flows.

“China is moving away from this high-volume, high-risk paradigm into one where deals are struck on their own merit, at a smaller and more manageable scale than before,” an analysis of China’s lending to Africa by Chatham House, a UK think-tank, said.

According to local analysts, lower funding to Africa, could indicate that Beijing is beginning to see signs of diminished benefits from the money it invests in the continent.

China has established itself as a financier of first resort for many low- and middle-income countries over the last two decades, providing record amounts of international development finance, according to researchers at the College of William and Mary in a late September report.

China’s influence on Kenya’s megaprojects gained traction during President Kibaki’s last term, when the Thika Superhighway was built between January 2009 and November 2012 at a cost of nearly Sh32 billion.