IMF Clears China of Kenya’s Debt Blame
In its Regional Economic Outlook for Africa report, the International Monetary Fund (IMF) stated that China is not the primary cause of debt distress in Kenya and other countries in Sub-Saharan Africa.
China accounts for 12 percent of the continent’s private and public external debt, which has increased more than fivefold over the past decade to Ksh10.4 trillion.
Kenya owed China Ksh946 billion as of March of this year.
In its report, the IMF states that Chinese lending is still modest, accounting for less than 6 percent of global lending in 2021, compared to Western and multilateral lenders.
“It is noteworthy that the debt owed to China has not been the principal contributor to the region’s public debt surge in the past 15 years,” the IMF said.
The report also notes that 60.9% of the continent’s public debt is attributable to domestic commercial borrowing, which carries higher interest rates and shorter maturities, while 13.7% of the debt is attributable to multilateral lenders.
Over time, various states, including those in the West, have accused China of exerting its lending influence, which has resulted in enormous debt loads for many African nations.
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China, in contrast, has refuted these allegations and instead pointed to the multilateral financial institutions and commercial creditors in the region, which are responsible for more than 80 percent of sovereign debt in developing countries.
Johns Hopkins University’s report titled “Integrating China Into Multilateral Debt Relief” echoed similar sentiments, suggesting that a greater proportion of the public external debt rests with creditors and multilateral institutions than with China.
“China only holds 21 percent of Kenya’s public external debt, with private creditors holding another 24 percent and multilateral institutions 45 percent,” the report highlighted.
The relationship between Kenya and China, the second-largest economy in the world, has strengthened over the years, particularly during the presidency of Uhuru Kenyatta, who sought financial assistance to improve Kenya’s infrastructure.
Under the administration of President William Ruto, there has been a perceived shift toward closer ties with Western nations, prompting concerns about his relationship with China.
Nonetheless, President Ruto secured Ksh688.7 billion in deals during his recent official visit to China, which are expected to be allocated to both existing and new initiatives.
According to data from the Treasury, Chinese loans to Kenya now total Ksh943 billion, or 64% of the country’s external debt.
IMF Clears China of Kenya’s Debt Blame