The government of Kenya has withdrawn its request for China to extend debt repayment holiday to December in the wake of opposition from Chinese lenders that recently froze disbursements to local projects.
The Treasury made the announcement and said they have decided not to seek an extension of the debt relief beyond June, adding that the country is fully paying Exim Bank of China which funded the construction of the standard gauge railway (SGR).
Chinese lenders, especially Exim Bank, were uncomfortable with Kenya’s push for extension of the debt service suspension with rich nations, prompting delays in disbursements to projects funded by Chinese financiers. The Chinese embassy in Nairobi acknowledged the funding hitch, adding that the matter was being addressed by officials of the two countries. The country is dropping its push for the debt repayment holiday extension by China for fear of straining relations with Kenya’s biggest foreign creditor.
Foreign exchange reserves
“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,” said Treasury Principal Secretary Julius Muia.
The World Bank had estimated that Kenya could save Sh55.9 billion from China between January and June under the DSSI deal in principal and interest payment freeze. However, China announced that Kenya would be granted Sh 26billion relief. A portion of the relief came from the SGR financier, China Exim bank.
Central Bank of Kenya (CBK) data shows that foreign exchange reserves dropped by Sh35.2 billion between July 15 and July 21. But World Bank data show the only major debt repayment for Kenya in July was for loans linked to SGR signalling payment of Chinese loans.
