Kenya’s mounting Chinese debts causing serious consequences: Report
Kenya is going through an economic emergency due to mounting Chinese debts leading many to believe that the successive Kenyan governments have over-borrowed for over-priced projects.
A rising China is not only detrimental to the global economy but is a dangerous path that needs to be countered through a collective effort.
Africa in specific needs to stand up to the Chinese strategy of providing unfavourable loans with conditions that intend to cripple economies at China’s behest, reported Africa Daily.
Kenya’s mounting Chinese debts are causing some serious consequences in the African nation. China in specific amounts for around a third of Kenya’s debt.
This has left the east African nation in excessive debt and overburdened the national economy, leading the general public to call for a transparent and accountable reassessment of Chinese investments in the country, reported Africa Daily.
These protests have seen some form of success when documents released by the Kenyan government after years of desecration proved that the Chinese side had unfavourable as well as hostile terms and conditions in infrastructural projects across the country.
This has since not only stressed the Kenyan economy but has also generated significant animosity with the general public against Chinese investments, reported Africa Daily.
The contract that was released by Kenya’s Transport and Infrastructure Cabinet Secretary, Kipchumba Murkomen, included details largely pertaining to one of the most ambitious projects that Kenya had ever taken in its history at China’s behest – The Standard Guage Railway initiative.
The project was initially stated as a game-changing investment for Kenya in its developmental trajectory, yet China’s appalling technique in granting high-interested loans to the developing world had once again taken prime position once the project was agreed upon.
The project during its inception was agreed to be paid by the Exim Bank of China, above and over the loans granted by the Exim Bank, the Kenyan government declared in 2020, that it had financial dues amounting to over 38 billion shillings to Afristar, a Chinese owned firm.
This took the overall borrowing for the SGR project alone to 420 billion shillings from China.
These excessive loans have now been having serious consequential effects on the Kenyan economy, reported Africa Daily.
In the disclosure of the contract, it has been revealed that Kenya was bound to keep the details secretive, while unfavourable terms had been agreed upon subsequently as well. Until the details were made public, observers noted that Chinese contracts with developing countries usually included clauses in which borrower countries were mandated to prioritize repayments to Chinese state-owned firms over other borrowings.
Although not every aspect of the deal was made public, it has been well known that China has maintained asset seizure clauses within such high lending projects.
In the SGR project too, Kenya was required to set up a special reserve account while also waiving off immunity for a specific port in Mombasa, thus making these two Kenyan assets vulnerable to seizure by China in case it was to default on their repayments post the end of the deal, reported Africa Daily.
Recently, when Kenya sought an extension on the debt payments, which was vehemently denied by China stating that Kenya was not a low-income earning country.
A similar request for a debt restructuring negotiation was denied by Beijing when the Kenyan government was dealing with the severe economic downturn induced by the pandemic.
These staggering details have only confirmed what had been previously speculated- China was providing loans to developing countries at commercial rates higher than the market with the promise of easy access to finances.
The severe indebtedness of Kenya has given China significant leverage not only in East Africa but in the whole continent as well where it has endeavoured in such similar deals.
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