“We are not able to pay”: Kenyan MPs urge renegotiation of Chinese rail debt

Kenya should renegotiate the $4.5bn loan it agreed with China to build the $3.2bn standard gauge railway between Mombasa and Nairobi, and cut the operating cost of the line by half, the country’s parliamentary transport committee has concluded (PDF).

Committee chair David Pkosing said "the entire loan framework should also be renegotiated" in light of the impact of the Covid-19 pandemic on Kenya’s finances. He said the interest rate should be decreased or the time to repay extended.

The service, which has yet to make a profit, is run by China Road and Bridge Corporation, a subsidiary of the railways builder, China Communications Construction Company.

Kenya currently pays Africa Star, China Road’s operating company, $1m a month to run the service. Since 2017, Kenya has failed to meet the monthly payment for 21 months, according to the Voice of America news site.

At present, Kenya owes Africa Star about $380m in unpaid bills, the EastAfrican news site reports.

In April, Ukur Yatani, secretary to the treasury cabinet, issued a supplementary budget that envisaged $714m in repayments to the China Export Import Bank, and £233m to the China Development Bank.

Kimani Ichung’wa, chairman of the Parliamentary Budget and Appropriate Committee, told The EastAfrican: "There are some investment decisions we have taken that are not in the best interest of the country, so it is time we start re-evaluating them and renegotiating with people who gave us the money so that we are able to survive."

He added: "It is very easy to resolve this issue of loan repayment by just sitting down with the Chinese and telling them we made a mistake. We owe you all this money but you are also demanding so much from us in terms of repayment. This is a debt. Look, our economy is beaten and we are not able to pay. We are not saying the debt is not there, but we simply want to renegotiate what we owe you and the terms of payment."

The railway carried more than 19,000 passengers and 421,000 tons of cargo between Nairobi and Mombasa in July. In April it was reported that it had made a reduced loss for its second year of operation (see further reading).

The line made a revenue of $126m for 2019, compared with $57m reported in 2018. However, the line’s operating cost is estimated to be $170m a year, compared with $120m in 2018.

So far, Ethiopia and Angola are the only African countries that have succeeded in renegotiating their debts to China.

Image: Workers celebrate the completion of the Ngnong Tunnel on the second phase of Kenya’s Standard Gauge Railway (CCCC SGR Head Office/Facebook)

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