China dominates list of lenders to Kenya by country

World Bank and IMF however remain the overall biggest lenders.

In Summary

•The country’s debt as of March 2024 comprised of Sh10.4trillion comprising Sh5.2 trillion domestic and Sh5.2trillion external.

•A further country analysis shows that France comes second having loaned Kenya an estimated Sh116.69 billion mainly on investments towards urban development and water projects.

Ongoing preparations outside the National Treasury building ahead of the 2024/2025 budget reading on June 13, 2024.
Ongoing preparations outside the National Treasury building ahead of the 2024/2025 budget reading on June 13, 2024.

Kenya owes China Sh920.52 billion in loans making it the leading lender by country rankings, even as President William Ruto looks west for more financing and trade cooperation.

Official data shows the Asian giant is still a major lender to Kenya mainly for the development of roads rails and port infrastructure.

China Eximbank has also financed a large number of key projects in the fields of transportation, clean energy, telecommunication and vocational education, as it remains the third biggest overall lender.

This is after the World Bank, whose credit line to Kenya is currently at an estimated Sh1.8 trillion and Eurobonds, where the outstanding amount is at Sh928 billion with maturities stretching to 2048.

The country’s total debt stood at Sh10.4 trillion as of March, comprising Sh5.2 trillion domestic and Sh5.2 trillion external, Central Bank of Kenya data shows.

A further country analysis shows that France comes second in bilateral loans having loaned Kenya an estimated Sh116.69 billion mainly on investments towards urban development and water projects.

The country's reliance on external funds to finance its development projects and economic initiatives has seen Japan with a debt of Sh111.53 billion, emerge third in the list of countries.

Germany's contribution stands at Sh52.78 billion, Italy's debt amounts to Sh31.44 billion and Belgium's financial involvement totals Sh28.45 billion.

Other lenders are Spain, whose contribution, amounts to Sh16.34 billion, and the USA, although a smaller creditor, has provided Sh1.15 billion.

Other notable creditors include Austria with Sh2.13 billion, Finland with Sh620 million, and Denmark with Sh320 million.

Additionally, loans from other Paris Club members total Sh2.36 billion, while non-Paris Club members account for Sh27.61 billion.

Kenya’s loan payments to the Export-Import Bank of China account for a quarter of total external loan repayments, according to the National Assembly’s Public Debt and Privatisation Committee.

The country will pay China Sh147.9 billion ($1.2 billion) in interest and principal payments in the fiscal year through June 2025.

Multilateral lenders however continue to account for up to 72 per cent of the country's overall debt led by World Bank, African Development Bank which Kenya owes Sh593.31 billion, and the IMF which has extended more than Sh421.6 billion, primarily for balance of payments support and economic reforms.

President William Ruto’s administration has maintained that Kenya's current debt situation underscores the urgent need for sustainable economic growth, to manage and repay these substantial obligations.

In a dispatch by Statehouse yesterday, the government said that while external borrowing has facilitated significant development, it also poses risks of debt distress.

Citing that effective debt management and comprehensive economic reforms are essential to ensure that these borrowed funds yield long-term economic benefits and prevent fiscal instability.

"In line with the administration's fiscal consolidation strategy, which seeks to reduce government borrowing, and in pursuit of the aspiration to achieve a balanced budget by 2027, the proposed budget consolidates these efforts by reducing the budget deficit by nearly 50 percent," it said.

It further adds: "This is realised through reduction of the deficit from Sh1 trillion in the financial year 2021-22, Sh925 billion in the financial year 2023-24 to Sh597 billion in the financial year 2024/25."

The statement from the office of the President noted the challenge for Kenya's government is to balance development needs with the imperative of maintaining fiscal health.

Despite these measures, the government has increased its borrowing target for the fiscal year starting July 1, 2024 to Sh597 billion.

This was an increase of Sh82.3 billion from a deficit of Sh514.7 billion that Treasury Cabinet Secretary Njuguna Ndung'u had earlier tabled in the National Assembly.

With a budget deficit of Sh597 billion, the Treasury is expected to borrow Sh333.8 billion externally and Sh2563.2 billion from the domestic market.

In the past three months, the strong shilling has come in handy in helping the state reduce its debt, amid the Erobond repayment 

Central Bank of Kenya governor Kamau Thugge in April revealed that The bullish shilling had cut Kenya's debt by Sh1 trillion.

WATCH: The latest videos from the Star