Kenya Hits a Record of Sh8 trillion Debt to China

China is currently Kenya’s biggest lender accounting for 67 percent of the external debt, mainly infrastructure financing Sh324 billion for the SGR. Commercial loans account for about 30 percent for bilateral loans and 30 percent for external loans.

Due to mainly infrastructure projects, the country’s debts amount to almost an eight trillion mark to China. The total debt stood at Sh7.99 trillion in September last year as indicated by the Central Bank of Kenya’s bulletin.

Patrick Njoroge, CBK’s governor said the country must take immediate action to manage its ballooning debt before it crushes the country’s economy. He said, “We need to be clear in the direction debt is taking us. The time is now. We don’t need to wait until it is crushing us.”

Publicly guaranteed and public external debt is at Sh4.1 trillion with domestic debt standing at Sh3.9 trillion. Bonds ranging from Sh40 billion and Sh60 billion have been issued by the National Treasury every month for budgetary support and infrastructure.

France and other major lenders account for seven percent of foreign loans but the National Treasury is confident that the country’s debt is sustainable. The country’s debts are projected to be just about Sh300 billion shy of the Sh9.1 trillion mark.

By the end of June, the country’s debt will be at Sh8.7 trillion as shown by the report given by given by the Committee indicating Kenya’s debts. The Senate Committee on Finance said, “This will bring it to the Sh337 billion short of Sh9 trillion debt ceiling and will result in the shortage of borrowing space to finance medium-term expenditure.”

The National Assembly has been pushed by the executive to revisit the country’s debt limit to Sh12 trillion, an aspect that has been pushed back by lenders like World Bank. Delays in disbursements affect service provision as a result of high debt service reducing the equitable share available to both government levels.

Njoroge was concerned that the country might be running out of room for more loans despite never having defaulted. These concerns rose when the country’s taxes were mostly used to pay off debts wherein every Sh100, Sh10 is used in debt payment.

A number of loan facilities including the fourth Eurobond issue of Sh108 billion in June. The country’s first Eurobond was worth Sh219.9 billion in 2014, then two more issues of Sh239.9 billion in both 2018 and 2019.

In terms of new loans, there have been repetitive expenditures in areas like health and education, increased guaranteed debt, and worsening terms on new loans like increased commercial loans and lower concessions.

There are investments whose impact will not be felt in the economy in the short term despite the hailing of heavy infrastructural investment.

During an appearance in a Senate Committee, Njoroge said, “Investment in infrastructure should stimulate the economy. Why is it that we cannot capture more returns on the investment in infrastructure?”