Please, please the Government of Kenya, somebody, anybody, tell us — that what we are hearing is not true.
Tell us whether indeed our Mombasa port has been leveraged for the Sh294 billion China loaned us for the standard gauge railway. We want to know the full facts. We demand complete disclosure. We have heard of Sri Lanka’s Hambantota port being seized by its Chinese creditors when it failed to repay the lenders.
We know, too, that Djibouti risks losing its strategic port in similar circumstances due to its heavy indebtedness to the Chinese. The sketchy information available is disquieting.
A November statement from the Auditor-General to Kenya Ports Authority questioned the loan arrangement with China Exim Bank for the construction of the SGR.
The statement suggested that Kilindini port could have been put up as collateral for the SGR loan, implying that Kenya would lose the port if it defaults on the loan.
This is no laughing matter. It amounts to putting for auction not just the family silver, but the entire farm.
I don’t want to throw brickbats until all the facts are clear.
Yet the Auditor-General can’t be raising red flags unless whatever he has dug up is highly fishy.
Pray, what is wrong with the supposedly highly astute technocrats at the Treasury who sign loan agreements on our behalf, or those lawyers at the AG’s chambers who are meant to scrutinise the fine print?
The Auditor-General has since sought to calm the waters somehow by clarifying that the initial statement was not “conclusive,” and that a full audit report will come when its queries to KPA are answered satisfactorily.
Why would KPA have anything to do with SGR loans, you may ask? Because the success of the SGR freight business depends on the Mombasa port.
Trust Kenyan Twitterati to find dark humour in the dire circumstances. Sample this: “What does one call dockyards in Chinese?”
Whatever way this alarming story turns out, Kenya’s debt position has become a matter of grave concern.
Our country’s debt addiction is tightly tied to China’s lending. One problem with computing this debt is that those doing the figures don’t always agree.
The data given by foreign risk-assessment institutions is often disputed by our own official number crunchers, who prefer a rosier picture, hard as it is to get.
Anyway, even if when we go with the latter’s numbers, the magnitude of the debt hole we are currently in is apparent to all.
Our official statisticians put Kenya’s Chinese debt at Sh534.1 billion as at March this year.
This amounts to 72 per cent of the country’s total bilateral debt, or that share of loans which are government-to-government.
The SGR loan forms a large component of this Chinese debt.
The next biggest bilateral lender — Japan — is far behind China’s outlay with only Sh91 billion.
In fact, Kenya is China’s third largest debtor in the entire Sub-Saharan Africa after Angola and Ethiopia.
Note: The other two countries have higher GDPs than Kenya’s.
Kenya’s debt to China could rise sharply again as the country seeks a further Sh380 billion to fund the SGR extension from Naivasha to Kisumu.
During the China-Africa Forum in Beijing last August, Kenya sought a grant (as opposed to commercial credit) to finance 50 per cent of the SGR extension. The request was denied.
Critics argue that Kenya’s large debt shows poor correlation to economic productivity, mainly due to corruption.
The complaint against the SGR is that it was grossly overpriced, compared to what countries like Morocco or Ethiopia negotiated for their railway projects. Chinese loans are also expensive.
Most come in the form of export credits, hardly as grants or concessional loans which are cheaper.
The Central Bank of Kenya has sought to downplay Kenya’s indebtedness to China.
But it has only succeeded to show how our overall indebtedness is worryingly high.
March this year, CBK put the country’s total external debt at Sh2.51 trillion, broken down as follows: Sh832 billion in multilateral debt (such as from the World Bank and the African Development Bank); Sh799 billion in commercial debt; Sh741bn in bilateral debt; and Sh140.4 billion in “guaranteed” debt. The CBK figures put our exposure to Chinese debts as a share of external debt at 21.3 per cent, still a high exposure.
A Treasury Quarterly Report in June showed our domestic borrowing, mainly from local banks and pension funds, had hit Sh2.4 trillion, very nearly as high as the external debt. In total, our overall debt had reached Sh5 trillion, which is 58 per cent of our GDP. That’s a precarious ratio.
Last week, the Kenya National Chamber of Commerce and Industry sent a memorandum to Parliament decrying Kenya’s debt position, terming it a threat to our sovereignty. A young star in Parliament, Emgwen MP Alex Kosgey, is pushing a Bill for more public oversight of government borrowing.