China Excludes Kenya from New Debt Relief Deal | The African Exponent.

China has excluded Kenya from a new list of African countries that will receive debt relief this year. The East African country has been left out because of its transition to middle-income status. 

China will provide debt relief to 17 impoverished states on the continent burdened with China’s massive loans. The agreement, announced last week, will see China forgive 23 interest-free loans for 17 African countries classified as least developed. Beijing made the announcement during the Forum on China-Africa Cooperation held last week. The forum aims to strengthen ties between China and its African partners. 

According to the Chinese Foreign Minister, Wang Yi, the debt relief plan demonstrates China’s commitment to building greater economic ties with the African continent. However, Kenya was excluded from the plan because it is now considered a lower-middle income country, which the new Beijing scheme does not apply to. 

Kenya, the largest economy in East Africa, surpassed the United Nations’ criterion of $1,045 in gross domestic product (GDP) per capita in 2014 and joined the group of lower middle-income countries. China is Kenya’s second-largest foreign creditor after the World Bank and is responsible for almost one-third of the country’s external debt service expenditures in 2021–2022. 

According to budget records, Kenya intends to spend a total of $980 million throughout the year on Chinese debt, of which around $200 million will go toward interest payments and almost $775 million on redemptions. 

Kenya has never defaulted on its debts, despite the recent economic unrest caused by the conflict in Ukraine that has increased the debt burden. The East African country’s cash flow position is getting worse as a result of declining income and increasing debt payment costs. 

Kenya last year requested a six-month extension of the debt repayment moratorium from bilateral lenders and G20 countries, including China, until December 2021 in order to avoid making a large payment to Beijing-based lenders. Most of the countries gave the East African country a one-year grace period. 

Despite the fact that China is a party to the agreement and a member of the G20, the majority of its loans to Kenya have been given on a commercial basis via government organizations, quasi-public enterprises, and state-owned banks like the China Development Bank and Exim Bank of China. 

China has tried to negotiate its debt relief agreements separately, employing the same criteria as the G20 nations while keeping the ability to decide which loans and which debts will be subject to the moratorium. 

Since 2014, China has provided loans mostly to President Uhuru Kenyatta’s administration for the construction of roads, bridges, power plants, and the standard gauge railway (SGR). 

The conditions of China’s loans to developing nations are particularly secretive and demand that borrowers pay Chinese state-owned banks first before other creditors. Borrowers are made to sign confidentiality clauses that prevent them from disclosing the terms of the loans; ad hoc collateral arrangements that favor Chinese lenders over other creditors; and commitments to keep the debt out of collective restructuring. 

Supporters of China’s Belt and Road initiative have commended it for giving crucial money to nations that are severely lacking in infrastructure. The initiative is accused by critics, notably the US, of burdening underdeveloped countries with debt. However, the Chinese view these critics as jealousy.

 China has excluded Kenya from a new list of African countries that will receive debt relief this year. The East African country has been left out because of its transition to middle-income status.

China will provide debt relief to 17 impoverished states on the continent burdened with China’s massive loans. The agreement, announced last week, will see China forgive 23 interest-free loans for 17 African countries classified as least developed. Beijing made the announcement during the Forum on China-Africa Cooperation held last week. The forum aims to strengthen ties between China and its African partners.

According to the Chinese Foreign Minister, Wang Yi, the debt relief plan demonstrates China’s commitment to building greater economic ties with the African continent. However, Kenya was excluded from the plan because it is now considered a lower-middle income country, which the new Beijing scheme does not apply to.

Kenya, the largest economy in East Africa, surpassed the United Nations’ criterion of $1,045 in gross domestic product (GDP) per capita in 2014 and joined the group of lower middle-income countries. China is Kenya’s second-largest foreign creditor after the World Bank and is responsible for almost one-third of the country’s external debt service expenditures in 2021–2022.

According to budget records, Kenya intends to spend a total of $980 million throughout the year on Chinese debt, of which around $200 million will go toward interest payments and almost $775 million on redemptions.

Kenya has never defaulted on its debts, despite the recent economic unrest caused by the conflict in Ukraine that has increased the debt burden. The East African country’s cash flow position is getting worse as a result of declining income and increasing debt payment costs.

Kenya last year requested a six-month extension of the debt repayment moratorium from bilateral lenders and G20 countries, including China, until December 2021 in order to avoid making a large payment to Beijing-based lenders. Most of the countries gave the East African country a one-year grace period.

Despite the fact that China is a party to the agreement and a member of the G20, the majority of its loans to Kenya have been given on a commercial basis via government organizations, quasi-public enterprises, and state-owned banks like the China Development Bank and Exim Bank of China.

China has tried to negotiate its debt relief agreements separately, employing the same criteria as the G20 nations while keeping the ability to decide which loans and which debts will be subject to the moratorium.

Since 2014, China has provided loans mostly to President Uhuru Kenyatta’s administration for the construction of roads, bridges, power plants, and the standard gauge railway (SGR).

The conditions of China’s loans to developing nations are particularly secretive and demand that borrowers pay Chinese state-owned banks first before other creditors. Borrowers are made to sign confidentiality clauses that prevent them from disclosing the terms of the loans; ad hoc collateral arrangements that favor Chinese lenders over other creditors; and commitments to keep the debt out of collective restructuring.

Supporters of China’s Belt and Road initiative have commended it for giving crucial money to nations that are severely lacking in infrastructure. The initiative is accused by critics, notably the US, of burdening underdeveloped countries with debt. However, the Chinese view these critics as jealousy.