Soaring Chinese Credit To Kenya-What's The Trick?
Kenya has joined the rest of the world in sucking in the easy Chinese credit that is causing worry about the intentions of Chinese Govt in lending money to even major countries like the USA.
What influence will Chinese credit have over the debtor countries? Sounds like a rhetorical question,but Kenyans are worried about the strings that China may attach to this soaring debt.
It is now clear that China has overtaken France as the second largest
lender to Kenya after Japan, reflecting Beijing’s
increasing importance as a source of development
funds for the country.
Data from the Central Bank of Kenya shows that
Kenya’s debt to Beijing rose by 50 per cent to about
$750 million in the year ended June 2013, compared
with $500 million in fiscal year 2011-2012.
At the same time, loans from multilateral lenders like
the International Development Association (IDA) —
the World Bank’s lending arm — and the African
Development Bank rose sharply, a trend analysts
interpret to mean that Nairobi is increasingly looking
for loans with fewer conditions than those of the
Loans from traditional partners like the US, Germany,
Japan (Kenya’s largest creditor) and Italy either
remained constant or dropped. France was the only
country to increase loans to Kenya during the period.
“The increase in bilateral debt stock was largely
attributed to disbursements from China meant for
financing infrastructural projects, and disbursements
from France during the period,” said the CBK in its
June monthly report.
In the year ended June 2013, Kenya’s external debt
rose by Ksh79 billion ($908 million) to stand at
Ksh843.6 billion ($9.68 billion), of which about 38
per cent is owed to IDA.
The debt owed to Japan declined from Ksh107.4
billion ($1.23 billion) in June 2012 to Ksh86.8 billion
($997 million) in June 2013. Debts to the UK, Italy,
Netherlands and US remained flat at less than $100
China’s ascent as a key creditor to Kenya has been
quick, with the country only appearing on the list of
the top 10 creditors to Kenya in 2012. The
willingness of Beijing to loosen its purse strings has
made it a favourite partner in government circles, a
development that is causing discomfort in
Washington, where China’s rising influence in Africa
is being closely monitored.
READ: East Africa’s future: Across the Indian Ocean?
Nothing captures China’s growing influence in
Nairobi better than the complaint last year by
Western diplomats that it was becoming hard to
access the president, hinting at a cosiness between
Kenya and China. The official response was that the
president was accessible to “any nation that works
for the good of the Kenyan people.”
Analysts say the strengthening of the relations
between the two countries stems from the relatively
flexible nature of Chinese lending to Nairobi.
Whereas Western countries demand environment
and social impact assessment reports before funding
projects, Beijing is known to ignore such
requirements, with its main condition being that the
contracts be handed to Chinese companies.
“China’s strategy is clearer than that of the West. If
its own interest converges with that of the host
country, it will fund a project without engaging in the
sideshows of, say, governance,” said Macharia
Munene, a professor of history and international
relations at the United States International
“For China, it’s about creating access to raw
materials — be it through building roads, rails or
ports. If there is political and economic backing for
the project, you can bet the Chinese will not hesitate
to fund it,” said Dr Samuel Nyandemo, an economist
at the University of Nairobi.