China fine Kenya Sh1billion for defaulting SGR loans
Taxpayers are set to shoulder more loan burden after China fined Kenya Sh1 billion for defaulting Standard Gauge Railway (SGR) loans in the year that ended in June.
The Export Import Bank of China and other lenders fined Kenya Sh1.312 billion mounting debt burden to President William Ruto’s government.
This comes following Ruto’s directive to return port operations back to Mombasa as revenues generated from the passenger and cargo services on the track are expected to dip further.
This reversed one of the most controversial policies of the Jubilee administration which was to ensure that the SGR has minimum guaranteed business to repay the Sh450 billion ($3.7 billion) debt taken to build it.
The Uhuru Kenyatta administration forced traders to use the modern railway line, a policy that saw the government transfer clearance to enforce compliance.
The SGR running from Mombasa to Nairobi cost taxpayers over Sh320 billion, while the line from Nairobi to Naivasha cost another Sh150 billion.
In June, operation costs stood at Sh18.5 billion against sales of Sh15 billion.
China is Kenya’s largest bilateral lender, with an outstanding debt of Sh692 billion or 66.5 per cent of all bilateral loans, as by the end of September 2021. The National Treasury officials revealed that they had requested all its bilateral creditors for debt service suspension estimated at Sh42.8 billion ($379 million).
“However, this amount is now projected to be lower at around Sh10.05 billion ($89 million) due to non-participation by some creditors,” said Kenyan authorities in a letter to the International Monetary Fund.
During the first phase (January to June 2021), Kenya obtained a debt suspension of Sh45.5 billion ($425 million), with China reluctantly joining other G-20 members in the debt service suspension initiative (DSSI) that was aimed at giving developing countries ravaged by Covid-19 pandemic reprieve in their debt repayment obligations.
During this period, China gave Kenya a debt repayment moratorium of Sh30 billion. However, the China Development Bank, another major Chinese lender, did not participate in the initiative.
China is said to have pushed back against Kenya’s request for the extension of the debt service holiday for another six months to December. Kenya is supposed to have paid China Sh63.1 billion ($558.4 million) between July and December 2021, according to data from the World Bank.
The repayment includes the first phase of the Standard Gauge Railway (SGR) from Mombasa to Nairobi, where Kenya was expected to pay Exim Bank of China about Sh10 billion.
World Bank data, however, shows that the country was to pay China, Sh36.8 billion ($325.7 million) in July alone.
However, this differs from the data given by the Treasury in one of its reports showing that it paid Sh29.86 billion to China in three months between July and September.
