Kenya is reported to have defaulted on repayment of the Chinese loans provided to build the standard gauge railway (SGR), reviving the nation’s struggles with the ballooning public debt.
In the year ending June, the Chinese financial institutions fined Kenya Ksh1.312 billion ($10.8 million) for loan defaults, according to Treasury documents seen by the Nation Newspaper .
Kenya is reported to have received millions of dollars from Chinese lenders, spearheaded by the Export-Import Bank of China, to fund the construction of the SGR from Mombasa to Naivasha.
Taxpayers have been coerced to shoulder the burden of the SGR loans since revenues generated from the passenger and cargo services on the track are insufficient and cannot meet the operation costs, which stood at Ksh18.5 billion ($152.8 million) in the year to June against sales of Ksh15 billion ($123.9 million).
“This (Ksh1.312 billion/ $10.8 million) relates to the cost of default on interest at one percent of the due amount,” say the disclosure documents.
SGR posted an operation loss of Ksh3.4 billion ($28 million), and wired Ksh22.7 billion ($187.6 million) in loan repayments in the year to June.
The default comes in a year when Kenya had prayed for an extension of the debt repayment moratorium from bilateral lenders, among them China, by another six months to December 2021, saving it from committing billions to the Beijing lenders.
However the lenders, particularly Exim Bank of China, opposed Kenya’s application for a debt repayment holiday in a standoff that delayed disbursements to projects funded by Chinese loans.
Last year, China postponed the repayments , helping Kenya temporarily retain Ksh27 billion ($223 million) that was due for six months ending June 2021.
The opposition from Chinese lenders pushed Nairobi into dropping its push for extension of the debt repayment holiday to avoid straining relations with Kenya’s biggest bilateral creditor.