After toppling Japan and Germany from the list of top bilateral lenders to Kenya, China has more than tripled its share of debt to Kenya in less than a decade.
A new analysis of the composition of Kenya’s bilateral lenders by Central Bank of Kenya (CBK) shows that China controlled less than one per cent of Kenya’s external debt portfolio in 2006.
By June 2011, however, the Asian giant was at position three, behind France and Japan, on the list of top lenders.
This position drastically shifted after the Jubilee government took over in 2013 in favour of China, which now accounts for 67 per cent of the Kenya’s external debt, up from just 13 per cent in June 2011. Japan’s share has dropped from 44 per cent in 2011 to just 14 per cent in June 2020. France’s has also whittled down from 16 per cent to seven per cent at the moment.
Leading bilateral lender
“The leading bilateral lender shifted from Japan to China between 2011 and 2020,” CBK governor, Dr Patrick Njoroge, said in a presentation on Finance and Budget on Kenya’s public debt status to the Senate committee.
Dr Njoroge blamed Kenya’s increased indebtedness to a rise in fiscal deficit largely due to development expenditure such as infrastructure, but also recurrent expenditure in key sectors such as education and health as well increased guaranteed debt.
The CBK also attributed Kenya’s debt trouble to worsening terms on new loans, such as lower concessionality and increased commercial loans.
The country’s high indebtedness is also blamed on exogenous economic shocks such as drought and Covid-19.
Dr Njoroge said the overarching concern is limited capture of the returns from expenditures or investments through increased exports, taxes, and faster economic growth.
CBK notes that the total debt service to revenues increased to 57 per cent in 2019 from 17 per cent in 2012 due a jump in debt stock and changing terms on new loans, including one-off repayment of syndicated loans and Eurobonds in 2019.
“This trend is expected to reverse in the medium term due to improving terms on new loans, and the restructuring of external commercial loans that have heavy maturities and high interest cost,” Dr Njoroge said.
By Nation Africa