President Ruto will seek a Ksh148.6 billion loan from China when he travels to Beijing later this month, Deputy President Rigathi Gachagua revealed in an interview with a local radio station.
According to the second in command, the money will be used to complete stalled road construction projects.
The head of state will also seek an extension on the repayment timeline of previous Chinese loans.
“Can we talk to see if you can add us time, so we can pay slowly, and add us a little money so we can finish road construction?” Gachagua said, referring to what the president would say to the Asian nation’s leaders.
A photo of Deputy President Rigathi Gachagua.
“If we get $1 billion (Ksh148.6 billion) we can be able to give these people (contractors) the money they are owed so they can return so even as we pay the debt, the roads are completed,” the Deputy President added.
This is a U-turn from the President’s stance on foreign loans during his campaign where he criticized former President Uhuru Kenyatta for overborrowing.
Currently, the country’s debt to China stands at more than Ksh1.1 trillion, most of which was borrowed during Kenyatta’s reign.
The funds were used by Kenyatta to develop infrastructure projects such as roads. However, the projects have since stalled with contractors decrying a lack of payment.
A huge chunk of the Ksh1.1 trillion went into the construction of the standard gauge railway connecting Nairobi to Mombasa Port.
To worsen the situation, Chinese SGR loans are dollar-denominated and two have floating interest rates, set at either 3.6 or three per cent above the LIBOR (London Interbank Offered Rate) average.
Moreover, global monetary tightening and a weakening Kenyan shilling have increased the burden of servicing them after initial grace periods on the principal repayments expired, with servicing costs ranging between Ksh125.9 billion and Ksh118.5 billion from July 2022 to March 2023.
This compounded with the Ksh297.6 billion Eurobond maturing in 2024, has forced President Ruto to implement several taxes and measures in a bid to reign in more revenue for loan repayment.
President William Ruto meeting with Chinese ambassador Zhou Pingjian and his delegation at State House on October 19, 2022.