Chinese debt trap diplomacy: Kenya offered 6-month ‘debt repayment holiday’ worth $245m, World News

In another example of Chinese debt-trap diplomacy, Kenya was bound by an agreement with a six-month debt repayment holiday worth $245 million. The deal was reached a week after the Paris Creditors’ Club, an informal group of creditors, proposed the same suspension of debt service worth $300 million until the end of June 2021.

The African nation is struggling to meet repayments as some of the projects, including the standard gauge railway – built under Beijing’s Belt and Road Initiative, are not generating enough revenue to pay for them themselves, the South China Morning Post reported. . It comes after Kenya was due to make its first repayment on a $1.48 billion loan from the Export-Import Bank of China (Exim Bank) which was used to build a railway line linking the capital Nairobi to the city of Naivasha in the Central Rift. Valley.

Under the rescheduling agreement, Kenya will have the next six years to make payments on suspended debt service charges, including a one-year grace period after June 2021. It was also granted a six-month suspension. servicing the Paris Club’s $300 million debt. creditors until the end of June 2021. The Kenyan Ministry of Finance has said that Kenya, however, will not seek similar suspensions from multilateral or commercial lenders to preserve its sovereign rating and future access to international financial markets.

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Kenya’s national treasury secretary Ukur Yatani said the deal with Beijing would give the country “opportunity and a break on the kind of liquidity we want,” the South China Morning Post reported. “We can now use this money to meet our obligations, including continuing to fund the national government and county governments,” SCMP said, quoting Yatani. “We’re happy to get the feedback we don’t need to pay for now,” he said. to impose an unbearable debt burden on future generations by borrowing more funds from China. The government claims that borrowing to build infrastructure will stimulate economic development.

Citing the National Treasury Loan Register, the SCMP said Nairobi was supposed to make 30 payments to the Exim Bank between Thursday and July 21, 2035. The interest rate had been set at 3% above the rate interbank offered in London.

Repayments of a separate $1.6 billion Exim Bank loan that Kenya used to build the first phase of the Mombasa-Nairobi standard gauge railway will fall due in July.

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In addition, repayment of a 50 million yuan ($7.7 million) loan for “economic and technical cooperation” is due to start on April 1, and in September that of a 660 million yuan loan used to upgrade Nairobi’s power grid, SCMP reported. Kenya was due to pay China about $499 million by the end of June, according to the World Bank’s debtor notification system.

Kenya has joined several other African governments in seeking China’s “debt trap diplomacy”. reported. Meanwhile, China is Kenya’s largest individual lender, having advanced around $6.7 billion in funding to build roads, railways, ports and other infrastructure as of the end of September. .

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