Word has it that the current joke at Treasury House along Harambee Avenue is that Chinese billionaires are angry with Kenya because one of their own, Jack Ma, had his PPE donation to the country stolen by corrupt government officials. This casual joke tries to hide a more serious incident that just took place in China as the government was trying to negotiate with their Chinese counterparts for an extension on the loan that they owe the Asians.
Kenya has withdrawn its request for China to extend debt repayment holiday to December in the wake of opposition from Chinese lenders that recently froze disbursements to local projects.
The Treasury says that Kenya has decided not to seek an extension of the debt relief beyond June, adding that the country is fully paying Exim Bank of China—which funded the construction of the standard gauge railway (SGR).
Chinese lenders, especially Exim Bank, were uncomfortable with Kenya’s push for extension of the debt service suspension with rich nations, prompting delays in disbursements to projects funded by Chinese financiers.
The Chinese embassy in Nairobi acknowledged the funding hitch, adding that the matter was being addressed by officials of the two countries.
Now, Nairobi is dropping its push for the debt repayment holiday extension by China for fear of straining relations with Kenya’s biggest foreign creditor.
“There is no request to the Chinese government for an extension of the moratorium on debt. Kenya is servicing its debts with the Exim Bank in line with the DSSI agreement,” Treasury Principal Secretary Julius Muia said.
Beijing is one of Kenya’s biggest foreign creditors, having lent Sh758 billion as at April 2021 to build rail lines, roads and other infrastructure projects in the past decade.
In January, China and other rich countries under the Debt Service Suspension Initiative (DSSI) gave Kenya a six-months debt repayments relief.
The impact of the Covid-19 pandemic has battered Kenya’s tax revenue collection at a time when more of its debts are falling due and continues to grapple with gaping fiscal deficits.
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