The Chinese government has postponed Kenya's debt repayments worth $245 million due over the next six months in a 'debt repayment holiday' in what is seen as another example of Beijing's debt-trap diplomacy.
Kenya was scheduled to pay 27 billion shillings ($245 million) to China from January through June. The announcement of delayed payment came a week after the Paris Club of creditors agreed to delay $300 million in payments by the government of East Africa’s biggest economy.
The debt relief from Kenya’s second-biggest external creditor after the World Bank “will give us an opportunity and break on the kind of liquidity that we desire,” Treasury Secretary Ukur Yatani was quoted as saying by Bloomberg.
The Kenyan government sought debt-repayment pauses as it struggles to deal with the economic fallout from the Covid-19 pandemic. The government had revised its 2020-21 budget-deficit forecast to 8.9 per cent of gross domestic product in October from an earlier estimate of 7.5 per cent.
The East African nation has been struggling with repayments to Beijing's Export–Import Bank of China to fund the building of a standard gauge railway, under the Belt and Road Initiative (BRI), as some of its projects are not generating enough income to pay for themselves, according to a South China Morning Post report.
The facility was to be repaid in 30 installments from January 21 to July 21, 2035, at a price of Libor plus 3 per cent, the Bloomberg said. “We were making every arrangement to pay by today, but two days ago after our engagement, we are happy to get feedback that we don’t need to pay now,” Yatani said.
According to reports, Chinese loans comprised 21 per cent of Kenya’s external debt at the end of June 2020, compared with the World Bank’s 25 per cent. Sovereign bondholders held another 19 per cent, commercial banks 11 per cent and the African Development Bank 7.5 per cent. Kenya was due to pay China about $499 million by the end of 2020, as per World Bank Debtor Reporting System.
This month, Chinese foreign ministry said that Beijing had signed payment suspension agreements with 12 African countries and provided waivers on mature interest-free loan, SCMP reported.