The country is set to start repaying the Standard Gauge Railway(SGR) loan to China after the lapse of the six-month debt repayment holiday that it received from G-20.
In January, the country was supposed to start repaying the Sh162 billion China loan used to build the Nairobi-Naivasha SGR line.
However, the country sought deals to suspend debt service with the rich nations under the Paris Club and other creditors, including China, covering the six months to the end of December.
The G20 countries, including Belgium, Canada, Denmark, France Germany, Italy, Japan, Republic of Korea, Spain and the USA, rescheduled payments of Sh32.9 billion in principal and interest due between January and June to the next four years with a one year grace period.
“Treasury had disclosed that Sh162 billion ($1.482 billion) debt from the Exim Bank of China that Kenya tapped in December 2015 had fallen due after a five-year grace period with the country expected to make 30 semi-annual payments for the next 14 years,” stated a report on the country’s external debt obligation.
The payment will include a principal of Sh.19.8 billion ($183.5 million) and an interest of Sh.15.4 billion ($142.2 million), according to data from the World Bank.
The World Bank had estimated that Kenya could save Sh55.9 billion from China between January and June under the Debt Service Suspension Initiative(DSSI) deal in principal and interest payment freeze.
But China announced that Kenya would be granted a Sh26 billion ($245 million) relief.
China is by far Kenya’s largest bilateral creditor but still accounts for less than 10 per cent of the country’s current Sh.758 billion total debt to build rail lines, roads and other infrastructure projects in the past decade.
Despite many of the prevailing assumptions, China’s actually proven to be far more flexible than many of Africa’s other major creditors in restructuring and postponing debt repayments.
Kenya completed its initial phase of the 487 km SGR line from Mombasa to Nairobi at a cost of Sh.380 billion with the bulk of the loan secured from the Chinese Exim Bank in May 2014 with a grace period of five years and repayment period of 15 years.
It also secured a further Sh.150 billion loan from the same bank to extend the SGR network to Naivasha popularly known as phase 2A that runs between Nairobi and Suswa in Naivasha.