WB Loans to Kenya Surpass Chinese Debt

The Kenya treasury took Sh54 billion ($535.7 million) World Bank loans in a three-month borrowing spree that has seen the Washington DC-based lender regain its top spot above China in the ranking of Kenya’s biggest creditors.

A new treasury report puts the World Bank’s total lending to Kenya at Sh581 billion ($5.8 billion) as at the end of June, slightly ahead of China’s Sh557 billion ($5.5 billion), AllAfrica reported.

The two lenders alone now account for about one fifth of Kenya’s total public debt load, which has already crossed the Sh5 trillion mark.

The hefty loans owed to China and the World Bank give the two significant influence on the country’s economic policy planning.

China had raced ahead of the World Bank at the end of December to become Kenya’s biggest creditor for the first time ever, largely on account of the loan borrowed to finance construction of the standard gauge railway, or SGR.

The treasury report shows China was still ahead of the World Bank as at end of March, but the ranking changed quickly in the three months to June.

The new World Bank loans were part of the borrowing intended to plug the treasury’s budget deficit for the fiscal year 2017/18. The World Bank channeled the money mainly through its concessionary lending arm, the International Development Association.

International Budget Partnership researcher John Kinuthia in an interview last week said it was inevitable that Kenya had to borrow huge amounts as the financial year came to a close.

“We should look at the whole issue of public debt from the point of view of the fiscal deficit. If the planned deficit is over Sh500 billion, as indeed it was, then such money coming from the World Bank should not surprise us,” said Kinuthia.

In the 2017/18 fiscal year, the realized deficit was Sh596.6 billion, including grants, with the domestic borrowing at Sh273.7 billion and the rest coming from overseas or international lenders. The total deficit amounted to 7.1% of the gross domestic product, slightly less than the programmed 7.2%.

In the three months to June, the Chinese increased their debt to Kenya by Sh24 billion, less than half of what the World Bank advanced the treasury within the quarter.

The accumulation of Chinese debt has caused anxiety among analysts and activists in recent times as it increased to hundreds of billions of shillings in just a few years while its repayment terms are not made public.