China, the main finance of Kenyan projects, is now adjusting terms used to remit funds to Kenya in the form of loans.
In the latest move, China is mulling plans to slash funds channeled to fund Kenyan projects. Currently, China offers loan facilities to Kenya which are then repaid after a period of time depending on the agreement in place.
China's President Xi Jinping stated that the loans are going to be cut up to 33 per cent. The latest directive will also affect other African nations funded by China.
The announcement regarding the slashing of funds was made during the Eighth Ministerial Conference of the Forum on China-Africa Cooperation (FOCAC). President Jinping insisted that loans to facilitate the progress of development projects will be Ksh6.75 trillion ($60 billion) set aside every three years.
Up to 2017, China was funding 42 per cent of Kenya's projects through loans with the major one being the Standard Gauge Railway (SGR).
The country has been repaying the loans since then, with the Asian economic giant setting May 2022 as the date to surrender SGR back to Kenyan authorities.
Ksh393.82 billion was channeled towards SGR but the tender still remains a secret up to date. Other projects include Ksh44.78 billion for oil terminal at the Mombasa port and road projects such as Southern and Eastern Bypass in Nairobi.
“Obviously Kenya ranks highly as one of the largest African recipients of Chinese debt, but we have already started seeing a slowdown in Chinese debt issues lately,” a financial expert stated.
This comes as the Treasury indicates that debt obtained from China grew by over a single digit in the last two financial years despite the country setting aside billions to service them.
With the growing debt, President Kenyatta's government dropped the bid to pursue more loans from China.
“Kenya mutually agreed not to pursue DSSI (deal with China) for mutual benefit,” the director-general for the public debt management office at the Treasury Haron Sirima said in September.
He added, “The shortfall compensated by other funding sources that are non-debt.”
