China fines Kenya 1.3b for defaulting on SGR loan
Chinese banks have fined Kenya Sh1.312 billion for loan defaults for the ended year, according to Treasury documents.
Kenya borrowed over half a trillion shillings from Chinese lenders, led by the Export-Import Bank of China, to fund the construction of the SGR from Mombasa to Naivasha.
The Kenyan government defaulted on repayment of the Chinese loans highlighting the country’s struggles with the huge public debt which is still attracting interest accumulations.
The Kenyan government had asked for an extension the previous year for the debt repayment. The extension was to offer the Kenyan government a moratorium from other lenders including China for another set of six months to December 2021.
However, the lenders, especially Exim Bank of China opposed the application for an extension for the debt repayment holiday in a standoff that delayed disbursements to projects funded by Chinese loans like the SGR. This opposition forced Nairobi to drop its push for extension of the debt repayment holiday to avoid straining relations with Kenya’s biggest bilateral creditor.
Kenya’s total debt increased to Sh8.85 trillion under the Kenyatta administration. Repayment for these loans had started in January 2020 after the lapse of a five-year grace period that Beijing had given the Kenyan government.
Taxpayers have been forced to bag the burden of the SGR loans because revenues generated from the passenger and cargo services on the track are not enough to meet the operation costs, which stood at Sh18.5 billion in the year to June against sales of Sh15 billion.