China and Kenya appear to be closing in on a debt restructuring arrangement just days before a major railway loan comes due.
The Chinese embassy issued a vague statement on 18 January that said both sides are holding “smooth” talks related to Kenya’s debt servicing challenges.
“China attaches great importance to debt suspension and alleviation in African countries including Kenya,” said the embassy statement.
Other than that brief statement, the embassy offered no other information on the talks or what the possible debt relief deal will look like. Time, though, is running out for both sides ahead of Thursday 21 January, when payments are scheduled to begin for a $1.4bn loan from the China Exim Bank for the Nairobi-to-Naivasha section of the Standard Gauge Railway.
If previous debt relief deals in Angola and Zambia are anything to go by, it’s likely that China will provide Kenya with an extended repayment holiday that will defer payments on some or all of the $6.4bn in loans that it owes Chinese creditors. It’s improbable, however, that the Chinese will cancel any of the concessional or market-rate loans. China is Kenya’s largest bilateral creditor.
By the Numbers: Kenya’s “Ballooning Debt” to China
- Transportation loans: From 2010 to 2018, Kenya borrowed just under $9bn from China with almost two-thirds of those loans funding transportation projects like the Standard Gauge Railway.
- Debt bubble: Kenya’s debt to China stood at $737m in 2014, the first year of President Uhuru Kenyatta’s presidency, before ballooning to $6.4bn in December, representing a 766% increase.
- Kenya’s debt profile: Chinese loans comprised 21% of Kenya’s external debt, compared with the World Bank’s 25% at the end of June 2020, according to a National Treasury report. Sovereign bondholders held another 19%, commercial banks 11%, and the African Development Bank 7.5%.
