Kenya and China reach agreement on debt deferral
China and Kenya have agreed to a six-month debt repayment holiday worth $245m. Treasury Secretary Ukur Yatani announced the deal during a radio interview on 20 January when he said the deferral “will give us an opportunity and break on the kind of liquidity that we desire.”
Although Yatani did not provide details, he gave the broad outlines of the deal according to a report by Citizen TV:
- Kenya will have the next six years to make payments on the suspended debt service costs including a one-year grace period after June 2021.
- Proceeds from the savings are required to be channelled towards combatting the pandemic.
- Kenya is further obligated to make public its entire stock of debt.
Chinese and Kenyan negotiators finalised the arrangement less than 24 hours before a critical deadline when a $1.4bn loan from the China Exim Bank to build the Nairobi-to-Naivasha railway would have been due.
“We were making every arrangement to pay by [Thursday 21 January], but two days ago after our engagement, we are happy to get feedback that we don’t need to pay now,” Yatani said.
The $245m debt rescheduling deal with the Chinese follows a similar $300m arrangement that was reached last week with Paris Club lenders.
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Kenya, however, will not seek similar suspensions from either multilateral or commercial lenders “to safeguard its sovereign rating and its future access to international financial markets,” according to the Finance Minister.
This article was first published in The China-Africa Project.