China under pressure to write off, suspend loans
Bernard Gitau @benagitau
China is facing mounting pressure to write off or offer moratorium on loans to Kenya and other African countries due to harsh economic times brought about by the coronavirus pndemic.
Participants at a conference in Nairobi agreed yesterday that it would be a toll order for Kenya to honour China’s loan obligations given the economic damage already evident since the outbreak of the virus.
James Mwangi, Energy and Extractives Sector Board chair at the Kenya Private Sector Alliance said the capacity of Kenya to pay in this Covid-19 period is untenable because “the more we pay the less we have”.
“China has an option to defer the loans to make it less painful for Kenyans or even better those loans are written off, though nothing comes for free,” he added.
Officials from government and embassies, China-Africa think tank and academia attended the Conference on Enhancing China-Africa Co-operation on Fighting Covid-19 and Promoting Manufacturing.
The two-day conference organised by Africa Policy Institute and Embassy of China, discussed various issues, especially growth of debt and trade deficit Kenya has with China.
Currently, China is Kenya’s largest trading partner in Africa, with China holding 11.55 per cent of Kenya’s foreign loans, valued at around $6.5 billion (Sh705.05 billion).
External debt is said to be about $60 billion (Sh6.51 trillion), which is 61 per cent of gross domestic product (GDP).
Kenya’s debt to China stood at Sh80.9 billion in 2014, the first year of President Uhuru Kenyatta’s presidency, before ballooning to Sh693 billion in December, representing a 766 per cent growth.
Mwangi said trade imbalance is real and hence there was need for policies change to address the issue.
“China has perfected and invested heavily on infrastructure i.e rail and roads but done little in terms of supporting manufacturing and industries. China should now focus on investing on those two areas locally to balance import and export,” he said.
Trade imbalance
The trade imbalance between Kenya and China still remains evident where imports from China to Kenya occupy 33 per cent of total world imports while exports from Kenya to China occupy less than 1 per cent of total world imports to China.
This year alone, the Treasury is seeking Sh95 billion in interest and principal installments to pay off loans from the Chinese government, Chinese Exim Bank and China Development Bank.
Kenya has turned to China over the past few years for funds, technology and equipment to develop its infrastructure, including the Standard Gauge Railway project or the SGR.
The railway opened in 2017 links Mombasa to Nairobi and is the country’s biggest infrastructure project since independence.
Critics accuse President Kenyatta’s government of saddling future generations with unbearable debt burdens by borrowing more funds from China.
On its part, the government says borrowing to build infrastructure will spur economic development.
Prof Peter Kagwanja, an expert on security, governance and strategic issues and the founding President and CEO of Africa Policy Institute, said Covid-19 has affected the Africa-China relationship hence the need for a new template to revive it.
