“Kenya’s Heavy Debt to China: Challenges and Solutions”

China has invested heavily in Kenya – in roads, ports and railways. And the African country has heavily indebted to China for this. How does Kenya get out of this debt?

For a year now, motorists have been able to escape the congested streets of Nairobi on an expressway.

High above Nairobi, the new expressway winds its way through the heart of the Kenyan capital on stilts. It connects the airport with the central business district. It was financed and built by China.

New deep sea port

Another major Chinese project is the port of Lamu. It should provide space for larger ships and relieve the deep-sea port in Mombasa, through which long-distance trade with the whole of East Africa runs.

Critics consider Lamu’s new deep sea port to be oversized: They doubt that the expensive project will pay off in the long term and criticize the environmental destruction that went along with the construction.

Railway line is largest investment

The largest Chinese infrastructure project in Kenya is the railway line from Mombasa to Nairobi. It is said to have cost around five billion US dollars, of which around two billion are said to have disappeared in dark channels.

Corruption is a big problem in Kenya. The railway line was actually supposed to be built hundreds of kilometers further – but then the money ran out.

Economist Aly-Khan Satchu says the railway line is a bad investment because it is not profitable. The burden of repaying the loan is quite heavy because Kenya is not making any money with the railway line.

Worry about political influence

Exactly how high Kenya’s debt to China is is difficult to say. It should be many billions of US dollars. In addition, Kenya has to pay high interest rates for Chinese loans.

The African government debt to China can have long-term consequences. Economic expert James Shikwati warns that political influence could grow along with economic influence: “If we can’t pay back, there’s a possibility that China wants to control what’s happening in the countries.”

Economist Aly-Khan Satchu believes that Kenya will not be able to get out of the Chinese debt on its own. Kenya’s economy is under enormous pressure. The dollar is strong, the Kenyan shilling is declining, high food and energy prices are weighing on the economy, as is the aftermath of the corona pandemic. Many African countries are in a massive debt crisis, says Satchu.

“Carried further than decades of Western development aid”

China is a close economic partner for many African countries. In Kenya, the attitude towards China as an investor is highly controversial: some complain of a high level of dependency and opaque, restrictive contracts.

The others celebrate the progress. Some are of the opinion that China’s investment policy, despite all the disadvantages, has brought Kenya further than decades of Western development aid. But China is not the Santa Claus who brings presents, says Satchu. China wants to make profits on its investments.

China is investing less again

But China has become more cautious and has been investing less money in Kenya for some time. New major projects are checked more carefully in advance in order to avoid bad investments.

This is another reason why Kenya is increasingly turning to old acquaintances: the Americans and Europeans, Japanese and South Koreans, as well as the International Monetary Fund and the World Bank.

Because they all give fresh money. And a significant portion of that money, economist Satchu explains, will be used to pay off the debt Kenya has owed to China.