President Ruto is set to request a loan of Ksh148.6 billion from China during his upcoming trip to Beijing later this month, as disclosed by Deputy President Rigathi Gachagua in a recent radio interview.
The purpose of this substantial loan is to facilitate the completion of long-delayed road construction projects, which have been a source of concern.
Additionally, the President aims to negotiate an extension of the repayment period for previous Chinese loans.
Gachagua explained, “Can we discuss the possibility of extending our repayment timeline, allowing for gradual payments, while also securing additional funds to expedite the road construction?”
Gachagua emphasized that with an injection of $1 billion (equivalent to Ksh148.6 billion), it would be possible to settle outstanding dues to contractors, enabling them to resume work on the road projects. This strategy would ensure that even as the country addresses its debt obligations, crucial road infrastructure is completed.
This marked a significant shift from the President’s earlier stance on foreign loans, during which he criticized former President Uhuru Kenyatta’s administration for excessive borrowing.
At present, Kenya’s debt to China exceeds Ksh1.1 trillion, with a significant portion of it acquired during Kenyatta’s tenure. These funds were primarily allocated to infrastructure development projects, including road construction. Unfortunately, many of these projects have stalled due to delayed payments to contractors.
Notably, a substantial portion of the Ksh1.1 trillion debt was allocated to the construction of the standard gauge railway, connecting Nairobi to the Mombasa Port.
Furthermore, the Chinese loans for the standard gauge railway are dollar-denominated, with floating interest rates set at either 3.6 or three percent above the LIBOR (London Interbank Offered Rate) average, exacerbating the financial challenges associated with repayment.
