Kenya’s request to seek an extension of debt relief from June to December 2021 has led China’s Exim Bank to stop disbursement of loans to Kenya. In the request, Kenya is looking to suspend debt service with the rich nations under the Paris Club of International Creditors and other creditors including China, requesting another six months from July to December 2021.

The debt relief was given to Kenya in January 2021 by China and other rich countries under the Debt Service Suspension Initiative (DSSI) which awarded Kenya a further six months grace. The DSSI deal was signed in December 2020 with the agreement meant to cushion nations whose top priority was to focus their resources in combating the COVID 19 pandemic. The G20 countries (*See below) rescheduled payments of Ksh 32.9 Billion in principal and interest due between January and June to the next four years with a one year grace period.

China Keeps Options Open

China being a G20 country and a signatory to the deal, still have a big portion of its loans to Kenya being made on a commercial basis by government agencies, quasi-public corporations and by state-owned banks such as Exim Bank of China. For this reason, China is opting to negotiate its debt deals separately but will apply the same terms as the G20 countries. This option for China allows them to decide the right of a debt relief.

China Loans Total Ksh 758 Billion to Kenya!

As of April 2021, China has lent Ksh 758 Billion to Kenya for the rail lines, roads and other infrastructure projects. These loans are over the past decade since 2014 where the Kenya government has been taking loans from China to build roads, bridges, power plants and the SGR.

According to the World Bank, Kenya could save Ksh 55.9 Billion from China between January and June under the DSSI deal in principal and interest payment freeze. However, this information is contradicted by the announcement made by China which states Kenya will be granted a Ksh 26 Billion relief. It is still in limbo as to how much debt relief Kenya got from China between January to June and now Kenya is requesting for a second six months debt relief period.

*The G20 countries are: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States, and the European Union.