Kenya Faces Financial Strain as Debt Repayments to China Surge

Kenya paid 152.69 billion KES (approx. 1 billion USD) to China in the last financial year, a 42.14% increase from the previous year, primarily for infrastructure loans. This financial strain has limited Kenya's ability to invest in development projects, amid challenges like the shilling's depreciation.

Kenya is grappling with financial strain as debt repayments to China surged to 152.69 billion KES (about 1 billion USD) in the last financial year. This represents a 42.14 percent increase compared to the previous year, according to a report by Business Daily. The payments include 100.47 billion KES in principal sums and 52.22 billion KES in interest.

The expenditure exceeded initial budget estimates by 40.76 billion KES, driven by fluctuating benchmark interest rates and currency conversion rates. AidData, a US research lab, highlighted that China's loan terms often demand prioritization of repayments to Chinese state-owned banks, featuring more stringent safeguards than other creditors.

Kenya's Treasury officials attributed a 36.42 percent rise in repayments to the depreciation of the Kenyan shilling and revised floating interest rates. As of March 2024, Kenya's debt to China stood at USD 5.67 billion. This financial pressure is constraining the fiscal space for President William Ruto's administration, impacting funding for key development projects.

(With inputs from agencies.)