The Exim Bank of China, which financed the Standard Gauge Railway (SGR) and other infrastructure development projects in Kenya, is seeking to take over the Entebbe International Airport in the neighbouring Uganda.
Kampala is now staring at a possible seizure of its only international airport following the delayed repayment of a Ksh22 billion loan owed to the Chinese lender.
According to the Daily Monitor, the bank rejected a request by Uganda to re-negotiate a loan the country took in 2015 with an aim of expanding the airport.
11 officials from Uganda had travelled to Beijing to plead with the bank to renegotiate the clauses in a bid to save sovereign assets to attachments.
"Our investigations found out that any proceedings against Uganda Civil Aviation Authority (UCAA) assets by the lender would not be protected by sovereign immunity since Uganda government, in the 2015 deal, waived the immunity on airport assets," the Daily Monitor reported.
Four Exim Bank executives noted any alterations to the clause would form a bad precedent in the future.
Prior to the trip by the 11-member delegation, the Exim Bank had suspended funding and cited violation of the loan agreement after UCAA failed to implement some of the clauses, which were not favourable to Uganda.
One such clause required UCAA to set up an escrow account which would hold the Authority’s revenues and not use the money accrued in the account.
Exim Bank realised the loan agreement clauses were not being implemented, hence, froze cash flow to the Chinese contractor.
Back home, Kenya has withdrawn its request for China to extend debt repayment holiday to December in the wake of opposition from Chinese lenders.
In August, the National Treasury stated it would not be seeking an extension of the debt relief beyond June.
The Ministry vowed to fully pay Exim Bank of China for funding the construction of the Standard Gauge Railway (SGR).
"There is no request to the Chinese government for an extension of the moratorium on debt. Kenya is servicing its debts with the Exim Bank in line with the DSSI agreement," Treasury Principal Secretary Julius Muia stated.
Treasury's response was following reports that the Chinese lender was seeking to seize Kenya's port assets over a loan.
