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China and Kenya in talks about debt challenges

By Eric Olander
Posted on Friday, 22 January 2021 11:34

A train on the Standard Gauge Railway (SGR) line constructed by the China Road and Bridge Corporation (CRBC) and financed by Chinese government in Kimuka, Kenya October 16, 2019. REUTERS/Thomas Mukoya

China and Kenya appear to be closing in on a debt restructuring arrangement just days before a major railway loan comes due. 

The Chinese embassy issued a vague statement on 18 January that said both sides are holding “smooth” talks related to Kenya’s debt servicing challenges.

“China attaches great importance to debt suspension and alleviation in African countries including Kenya,” said the embassy statement.

Other than that brief statement, the embassy offered no other information on the talks or what the possible debt relief deal will look like. Time, though, is running out for both sides ahead of Thursday 21 January, when payments are scheduled to begin for a $1.4bn loan from the China Exim Bank for the Nairobi-to-Naivasha section of the Standard Gauge Railway.

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If previous debt relief deals in Angola and Zambia are anything to go by, it’s likely that China will provide Kenya with an extended repayment holiday that will defer payments on some or all of the $6.4bn in loans that it owes Chinese creditors. It’s improbable, however, that the Chinese will cancel any of the concessional or market-rate loans. China is Kenya’s largest bilateral creditor.

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