China is Kenya’s largest creditor with 72% of total bilateral debt — Quartz Africa

Correction: An earlier version of this story incorrectly referred to the 70% debt load that Kenya owes China as foreign debt. It is bilateral debt. This story has also been updated to clarify the difference between bilateral debt and foreign debt.

Kenya’s public debt burden recently outgrown the 5 trillion shillings ($50 billion) mark, renewing questions about the government’s lending binge, how it would show revenue in terms of economic growth, and whether it could repay these loans over the long term.

Much of those loans have come from China in recent years, but new data shows that Kenya’s obligations to Beijing run much deeper than many ordinary Kenyans realize. China is now far away The largest lender in Kenya, accounting for 72% of bilateral debt at the end of March, according to Treasury documents obtained by Kenya business journal Newspaper.

That’s a 15 percentage point increase from 2016 when China accounted for for 57% of Kenya’s bilateral debt. It is also eight times what it received from its next largest lending partner, France. Bilateral debt refers to debt between nations and is part of a country’s overall external debt, which also includes debt to international organizations such as the World Bank, called multilateral debt. Overall, China accounts for more than 21% of Kenya’s foreign debt.

In recent years, Nairobi officials have defended the lending spree, saying it was part of efforts to improve investment in infrastructure, expand energy options and distribution, and improve transportation systems. Growing access to Chinese finance also points to developing China-Kenya relations as the government seeks to access easy loans with fewer strings attached.

In early May, Kenya was also the latest nation to join the Asian Infrastructure Investment Bank, a China-led financier offering credit abandoning the conditionality of deregulation, privatization and reforms that come with the help of Western-led multilateral agencies like the IMF. Kenya was also one of 14 African states that recently met in the Zimbabwean capital Harare to discuss whether hold the yuan as part of its foreign exchange reserves—pointing to the growing power of China as a world financial power.

Critics, however, argue that China’s increased lending only foster dependency and could have the potential to catch nations in debt. The Chinese “have become adept at colluding with cabinet secretaries and heads of state-owned companies to sign opaque trade deals that end up burdening our foreign debt record with expensive loans,” said Jaindi Kisero, a columnist for the Kenyan Daily Nation newspaper. wrote In May.

Rising debt levels in Kenya are already causing global concern as well. In February, the global rating agency Moody’s downgraded Kenya due to rising debt levels and deteriorating debt affordability. The International Monetary Fund also stopped Kenya’s access to a $1.5 billion standby line of credit due to failure to meet fiscal targets. The IMF urged Kenya to reduce its deficits and put the country’s debt on a “sustainable path”. All of this is happening as Kenya is rocked by a series of corruption scandals involving government officials who allegedly siphoned tens of millions of dollars from state coffers using bogus bids and vendors.

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