China is not the main cause of debt distress in Kenya and other countries in Sub-Saharan Africa, the International Monetary Fund (IMF) has said in its Regional Economic Outlook for Africa report.
China accounts for 12 per cent of the continent’s private and public external debt, which increased more than fivefold to Ksh10.4 trillion in the past decade.
Kenya In terms of external public debt, China’s share accounts for Ksh20 trillion, rising from 2 per cent to 17 per cent in the past 12 years.
IMF in its report states that Chinese lending is still small, accounting for less than 6 per cent in 2021, compared to other Western countries and multilateral lenders.
President William Ruto and IMF Managing Director Kristalina Georgieva in France on June 22, 2023.
“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.
Additionally, the report highlights that 60.9 percent of the public debt in the continent can be attributed to domestic commercial borrowing, which comes with higher interest rates and shorter maturities, whereas multilateral lenders are responsible for 13.7 percent of the debt.
Over time, various states, including those in the West, have accused China of exerting its lending influence, resulting in huge debt burdens for many African nations.
In contrast, China has refuted these allegations and instead pointed to the multilateral financial institutions and commercial creditors in the region, which are responsible for over 80 percent of sovereign debt in developing countries.
A report titled ‘Integrating China Into Multilateral Debt Relief’ released by Johns Hopkins University echoed similar sentiments, suggesting that a larger percentage of the public external debt lies with creditors and multilateral institutions rather than China.
“China only holds 21 per cent of Kenya’s public external debt, with private creditors holding another 24 per cent and multilateral institutions 45 per cent,” the report highlighted.
Over the years, the relationship between Kenya and China, the world’s second-largest economy, has grown stronger, especially during the presidency of Uhuru Kenyatta, who sought financial assistance to enhance Kenya’s infrastructure.
However, under President William Ruto’s administration, there has been a perceived shift toward closer ties with Western nations, prompting questions about his relationship with China.
Nonetheless, in a recent official visit to China, President Ruto secured deals amounting to Ksh688.7 billion, which are expected to be allocated to both existing and new projects.
According to Treasury data, Chinese loans to Kenya now amount to Ksh943 billion, constituting 64 percent of the country’s external debt.
President William Ruto (centre) poses for a photo with other Heads of State during a State Banquet held in Beijing, China on October 17, 2023.