Kenya was fined Sh1.312 billion in the year ended June for defaulting on repaying the Chinese loan which was provided to build the standard gauge railway (SGR), and other country’s shortcomings and mounting public debts.
This amount is over half a trillion in Chinese currency. It was led by the Export-Import Bank of China to pay for the construction of the Standard Gauge Railway (SGR) from Mombasa to Naivasha.
Revenue generated from passengers and cargo services is not enough to meet the loan, however, taxpayers are cajoled to carry the burden of the SGR loan. Kenya asked for an extension for the debt repayment by an additional 6 months to December 2021 from bilateral lenders with China which were rejected by the Exim Bank of China and other leaders. Nairobi was forced to drop its push in extending its debt repayment to deflect any relation with Kenya’s biggest bilateral creditor.
Kenya failed to return the money as when due and that led to the increase of the loan a total of Sh117.7 billion of which Sh24.7 billion is the interest and over Sh93 in redemptions, according to the budget document. Kenya’s finance was distressed in the face of fast-maturing debts that are deep into tax collection and squeezed funds for development plans.
Getting a loan from the World Bank and any development lenders was hard because Kenya is a lower-middle-income economy of their status in the economy. However, the former president Uhuru Kenyatta’s administration took loans from China in 2014 for road, and bridge projects and SGR.
The country’s infrastructural development started with the influence of China in earnest with the construction of the Thika Superhighway between January 2009 and November 2012 at the cost of Sh32 billion during President Mwai Kibaki’s last regime.
Getting loans from China to developing countries are mostly secretive and borrowers are to budget themselves well to make payment before when due.