Kenya walked into the dragon’s trap. It holds a message for South Asia | Opinion – world news


Zambia has in spite of everything received a six-month reprieve from China Development Bank on repayment of its debt due in October, the government in Lusaka announced final month after a desperate SOS that it used to be on the verge of a default. Lusaka had already been making an attempt to restructure and refinance its Chinese debt when SARS-CoV-2, the virus that causes Covid-19, first reached Africa and all of a sudden spread across the world, infecting over 52 million and wreaking havoc on global economies. It has only gotten worse.

Like in Kenya, one of China’s largest business partners in Africa that owes $6.5 billion to China, 22 percent of its complete outside debt. China’s interest payments represent 87 per cent of the cash used to service debt expenditure in 2019. Kenya is yet to work out an arrangement with China but has been reluctant to seek debt relief amid reports that it used to be concerned it could hurt its ability to tap capital markets.


Kenya and neighbouring Ethiopia, according to the World Bank’s international debt statistics, are some of the world’s most indebted countries. Kenya’s outside debt rose four times over the past decade, only second to Ethiopia that saw its debt increase five-fold all over the decade.

Analysts say the $3.2 billion contract with China in 2014 to build the usual gauge railways connecting Kenya’s capital Nairobi and the port city of Mombasa symbolised the problem. The railway line used to be expanded in 2015 to Naivasha town 75 miles northwest of Nairobi, raising the project cost by another $ 1.5 billion.

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The railway line made a loss of $ 90 million in its first year; the government promised a profit in 2019. It ended up in the red again. The government has been forcing businesses to move their cargo on the railway to make sure it generates enough cash for operations but the project still recorded a loss of $200 million over three years. In September, a panel of lawmakers nudged the government to renegotiate the loan deal and cut operating expenses by half. Kenya hasn’t had its way yet.

The overpriced project, hugely criticised by independent observers correct from the time it used to be first announced, has also been in the highlight after Kenya’s appellate court ruled in June that the contract had been signed in violation of the rules and used to be unlawful.

In any case, Kenya doesn’t have an option but to pay back the money.

Or Kenya could stand to lose the lucrative Mombasa port that used to be pledged as collateral when the immense loan used to be accepted.

Mombasa is counted as east Africa’s largest and most valuable port. It isn’t just the gateway into Kenya, but also its landlocked neighbours; Burundi, Congo, Rwanda, South Sudan and Uganda. Also, Kenyan media has reported, Nairobi could also have to give regulate of the Inland Container Depot that could bring thousands of port workers under Chinese lenders.

Kenya and Zambia’s story repeats itself across Africa, Asia and Latin The united states. According to the Financial Times, China has transferred almost $150 billion to governments and state-owned firms in Africa alone to safe commodity supplies and fund its global network of infrastructure projects, President Xi Jinping’s signature Belt and Road Initiative.

Beijing is already the world’s largest non-commercial lender, more than the International Monetary Fund and the World Bank. China’s share of bilateral debt owed by the world’s poorest countries to members of the G20 has risen from 45 percent five years ago to 63 percent final year, A recent World Bank outline estimated China’s outside loans and business credits at $1.6 trillion, or near to 2 percent of global gross domestic product.

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China watchers in New Delhi speak approximately how Beijing has expanded its footprint and influence in South Asia too by pouring billions of dollars in pricey infrastructure projects that mostly serve Beijing’s strategic interests and must be executed by Chinese companies and Chinese workers.

Like the China Pakistan Economic Hall that finally will be paid for by Islamabad. Or the rail and deep-sea port projects along an economic hall to Myanmar that will link China’s south-western interior to the Indian Ocean.

Because the loans don’t seem to be based on the economic feasibility of the projects in the first place and are opaque, they’re also seen to fuel allegations of corruption and autocratic behaviour.

Beijing has its grip on Sri Lanka to an extent that when US secretary of state Mike Pompeo used to be in the country to crusade against China’s debt diplomacy, Colombo – which is in the midst of negotiations with Beijing for another tranche of loans – in a well mannered way made it known that it wasn’t going to change its approach to China. In 2017, Sri Lanka already handed over the strategic port of Hambantota on the country’s southern coast to China on a 99-year lease when it had trouble repaying its initial loan for the port.

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