Counties Focus

China grants Kenya debt repayment holiday -Treasury

After China accepted the request for a debt-repayment holiday in the six months to June, Kenya might save up to Sh55 billion.

National Treasury revealed that Beijing has approved the Debt Service Suspension Initiative (DSSI) application from Kenya, which is being carried out under the G-20 framework.

“(We) had good feedback on the matter,” Yatani said when asked about the debt repayment holiday in a text message.

He added: “Now the nod has been received to deal with procedural problems.” The CS did not disclose the amount of money Kenya will save through the debt service suspension initiative.

Even so, a monthly debt service payment schedule recorded in the Debtor Reporting System of the World Bank revealed that by the end of June, Kenya had to pay close to Sh55 billion.

Big Win

It is a huge win for the cash-strapped Treasury that has fallen behind in disbursement of funds to counties as the detrimental effects of the Covid-19 pandemic have reduced revenues.

Funds saved from the Chinese debt-repayment holiday contribute to the Sh32.9 billion earlier earned by the Treasury from the one provided by 10 countries of the Paris Club, with free-up cash planned to be used to counter the economic impact of the pandemic.
Germany, Belgium, Spain, Canada, France, South Korea, Denmark, Italy, USA and Japan were among the Paris Club countries that decided to step in for Kenya.
China is Kenya’s largest bilateral lender, extending approximately Sh736 billion to the nation in September last year.
Kenya was supposed to repay approximately Sh116.8 billion to China at the end of this year, with a substantial chunk of the repayment being in principle.

Principle payments are valued at Sh75.9 billion and Sh41 billion in interest.
The country will start repaying Sh162 billion loans to the Naivasha-Nairobi Standard Gauge Railway (SGR) this year, which was due to fall on January 21. This loan was to be repaid at the end of July 21, 2035, in 30 equal instalments.

According to the World Bank, the new repayment of the Nairobi-Naivasha SGR loans owed to China in January was estimated at Sh28.5 billion. Besides, Kenya is scheduled to repay Sh35.8 billion to China on July 21 and repay Sh176 billion in SGR loans.