Kenya Could Lose Port on Default of China Exim Loan, Nation Says

NAIROBI (Capital Markets in Africa) – China’s Export-Import Bank could take over East Africa’s biggest port should Kenya fail to repay a loan taken to finance its new railway, Nation newspaper said, citing a report by the country’s auditor-general.

The Chinese bank agreed in 2014 to lend Kenya 90 percent of the $3.8 billion it required for the railway’s first phase linking the port city of Mombasa to the capital, Nairobi. The East African nation secured another $1.5 billion in 2015 for an extension to Naivasha town, 120 kilometers (75 miles) northwest of Nairobi.

“We don’t want to make any comments on that because any document would have to be part of an internal auditing process, and we don’t comment on the validity or authenticity of those documents as a matter of policy,” Wilfred Marube, the auditor-general office’s head of public relations and communications, said by phone.

China is Kenya’s biggest external creditor with 22 percent of the country’s 2.4 trillion shilling external debt by June 2018, according to Treasury data.

The Kenyan railway is part of President Xi Jinping’s “Belt and Road” trade and infrastructure initiative that’s been criticized for saddling developing nations with unnecessary debt.

In an example of what could go wrong with such borrowing, China took over Hambantota port on a 99-year lease after Sri Lanka borrowed heavily to build the facility and couldn’t repay. In another instance, Zambia’s external debt has more than doubled to at least $9.4 billion since the end of 2014, partly because of infrastructure loans from China that the government is now trying to renegotiate.

Source: Bloomberg Business News