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Kenya Wants to Renegotiate Loans for Chinese-Built Railway


FILE - An aerial view shows a train on the Standard Gauge Railway (SGR) line constructed by the China Road and Bridge Corporation (CRBC) and financed by the Chinese government, in Kimuka, Kenya, Oct. 16, 2019.
FILE - An aerial view shows a train on the Standard Gauge Railway (SGR) line constructed by the China Road and Bridge Corporation (CRBC) and financed by the Chinese government, in Kimuka, Kenya, Oct. 16, 2019.

Kenya wants to renegotiate a multibillion-dollar loan from China that was used to build a major railway.

The country's incoming transport minister, Kipchumba Murkomen, told lawmakers that Kenya is up to date on its payments but cannot continue with the current 20-year schedule.

Answering questions from a parliamentary committee, Murkomen said the country will have to ask for an extended period to pay, especially in regard to the loans used to build what is known as the Standard Gauge Railway.

"There was a strategic decision that was made at that time that we take to invest in the infrastructure and the government of Kenya pays within 15 to 20 years. Now we are choked with loans because we are paying $80 million per year to the lenders for the SGR," he said. "One thing we are willing to continue paying the amount that was set … we should be willing, led by the president, to renegotiate the loan period if we manage to move the loan period even to 50 years."

FILE - Kipchumba Murkomen, then Kenya's Elgeyo-Marakwet county senator, addresses the media in Nairobi, July 22, 2019.
FILE - Kipchumba Murkomen, then Kenya's Elgeyo-Marakwet county senator, addresses the media in Nairobi, July 22, 2019.

Kenya borrowed $5 billion to build the railway line from the port of Mombasa to the city of Naivasha, west of Nairobi.

The railway was opened for business in 2017 and the government forced businesses to transport goods by rail to help repay the loan.

The railway, however, has lost money.

"It becomes impossible to be able to pay that loan by revenue that comes from the railways. And even in 50 years, it will not break even if you load the loans to the railways," Murkomen said.

Kenya's previous government is accused of overborrowing to finance development projects, which has also increased corruption. China also financed a 27-kilometer expressway in Nairobi, costing $734 million.

Most of Kenya's infrastructure deal with China has been shrouded in secrecy. The agreement that led to the newly-built railways has remained secret despite a court order demanding it be made public.

Murkomen said he would ask for the agreement and share it with parliament.

Kenyan economist Gerrishon Ikiara said the misuse of money and corruption are to blame for the country's debt problems.

"We are not allowing the money borrowed to be used strictly for the project. But sometimes, in Kenya, there is a lot of corruption in the projects because if you are able to utilize the money properly evaluated, there is competitive bidding for the projects," Ikiara said. "I think we would have covered many more kilometers. But that mistake has been made. A lot of corruption adversely affects the full cost of projects in the country."

Ikiara also said Kenya's generally good relations with China may lead to a more sustainable debt payment program.

"Friendly countries always negotiate. Because China may have their own issues it may have borrowed itself, so it's also looking at its economy and asking what's our ability to adjust to the terms Kenya wants. That's why friendly relations are very important."

China accounts for one-third of Kenya's external debt. The new Kenyan government under President William Ruto has said it will reduce reliance on foreign loans and borrow more in the domestic market.

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