Accessibility links

Breaking News

Kenya: No Default on China Debt

FILE - People disembark from a train in Kimuka on the Standard Gauge Railway (SGR) line constructed by the Chinese Communications Construction Company (CCCC) and financed by Chinese government, Oct. 16, 2019 .

The Kenyan government has denied media reports that Chinese banks have fined the country $11 million for failing to pay back loans used to finance a major railway. Kenya's ministry of finance, Ukur Yatani, said Thursday the country never defaulted on any of its creditors.

The East African nation borrowed $4 billion to construct the Standard Gauge Railway from the port of Mombasa to Naivasha town, some 100 kilometers from the capital.

Senator Samson Cherargei, a member of the ruling United Democratic Alliance party, told VOA the government is in a solid position to pay its debt of 10 trillion Kenyan shillings, equal to 82 billion U.S. dollars.

"I am confident the 10 trillion debt that is facing the republic of Kenya is still sustainable and the government can still pay and as parliament, we have ensured that we receive a regular medium-term update in terms of the government payment of the public debt. So, I have a lot of confidence that the government will be able to pay its public debt," Cherargei said.

In June, the previous parliament increased the public debt limit to $83 billion to help the incoming government borrow more to help it run its programs.

Samuel Nyandemo, who teaches economics at the University of Nairobi, said Kenya cannot sustain itself without borrowing but must make good use of the money it borrows locally and internationally.

"I don't think Kenya has reached where it can sustain itself. The best they can do is minimize borrowing, borrow where necessary and whatever they borrow, they put it into productive use," he said.

The Kenyan government is blamed for over-borrowing in the past and overvaluing major projects, leaving the country with gigantic loans to pay back.

China accounts for a third of Kenya's external debt.

New President William Ruto insists on reducing foreign borrowing and finding alternatives to finance government projects.

Last month, he ordered the treasury cut $2.5 billion in government spending.

The Standard Gauge Railway (SGR) is Kenya's biggest infrastructure project since independence from Britain in 1963 and was launched as a master plan by East African leaders to connect their nations by rail.

Currently snaking from Mombasa via the capital Nairobi to the Rift Valley town of Naivasha, it is planned to eventually link Uganda, Rwanda, South Sudan, Burundi and Ethiopia.

Some information for this report came from AFP.