Ruto lobbies for Chinese support as Kenya battles debt

President William Ruto's visit to China has him tagging along a wish list that, if fulfilled will see him bag cheaper concessional loans and funding for key infrastructural projects that will also inflate the country's crippling debt burden.

Public debt stood at Sh10.56 trillion as of June this year, having grown from Sh8.58 trillion in June 2022, just three months before President Ruto took over. 

The stock of debt is set further to grow this year with the government planning to borrow Sh761 billion over the 2024/25 financial year, a significant increase from Sh597 billion that it had planned to borrow before the rejection of the Finance Bill 2024.

This will see the fiscal deficit as a share of GDP increase to 4.2 percent from 3.3 percent.

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The Standard can report that the head of state, who has rarely ventured out of Nairobi since June this year mainly because of Gen Z protests, went to China with grand dreams of bagging financial support for critical sectors which include regional security.

China is also expected to yield benefits for both countries, with focus set on trade, investment and regional security, as Kenya seeks to expand its foreign funding pool.

The president, accompanied by senior government officials, is attending the 9th Forum on China-Africa Cooperation (FOCAC) summit, at the invitation of his Chinese counterpart, Xi Jinping.

President Ruto has held bilateral meetings with various leaders as well as private entities to explore ways of enhancing investments in Kenya.

He is seeking new public-private partnerships to boost national development in such areas as the Jomo Kenyatta International  Airport  which is already in the eye of a major storm following overtures by India's Adani which is negotiating a deal a 30-year deal takeover.

Yesterday, the head of state announced on his X handle that Kenya has formally joined the Asian Infrastructure Investment Bank (AIIB) as a fully paid member.

According to Ruto, the membership will enable Kenya to access concessional funding for infrastructure, climate change efforts, connectivity, regional cooperation and technology-enabled projects and programmes.

“The Asian Infrastructure Investment Bank is a multilateral development institution with 109 members and $100 billion capitalisation,” Ruto said.

“Kenya is very proud of joining a family of very distinguished members. We are looking forward to engagements with the bank for development of infrastructure and improvement of the welfare of our citizens,” he added.

In the last five years China has frozen loans to Kenya, a development that has adversely affected a country which used Sh152 billion to finance Chinese debts in the last financial year.

By October last year, Kenya was owing China an estimated $8 billion which was largely taken during President Uhuru Kenyatta's tenure to finance infrastructure projects most of which have stalled.

During a meeting with AIIB President and Board of Directors Chairman Jin Liqun and other officials at the bank's headquarters in China President Ruto cited infrastructure, climate change efforts, connectivity, regional cooperation and technology-enabled projects and programmes as the opportunities for financing.

Concessional loans, which have preferential terms than commercial loans, are expected to go a long way in safeguarding debt sustainability and also supporting projects with long gestation periods.

With Kenya becoming a member of AIIB, expectations are that they will jointly guarantee panda bond with Africa Development Bank.

Reports previously indicated that Kenya had sought to raise billions through the sale of panda bond in China this financial year, which would be used to finance the budget deficit.

AIIB supports climate change efforts and helps members achieve their environmental and development goals, aligning with the United Nations Sustainable Development Goals and the Paris Agreement. 

The bank targets to direct 50 per cent of approved financing to climate-related initiatives by 2025. It also focuses on projects ranging from roads and railways to airports, energy pipelines, port and telecom networks.

Similarly, AIIB is devising innovative solutions to attract private capital in collaboration with other MDBs and partners, including co-financing arrangements.

At the same time Ruto said  FOCAC underpins Kenya-China strategic partnership, which provides a platform to explore opportunities for a people-centred and mutually beneficial relationship between the two countries.

He said the partnership is marked by practical infrastructure projects like the Standard Gauge Railway (SGR), Kipevu Terminal in Mombasa and Nairobi Expressway, among others.

“Kenya and China have excellent and cordial diplomatic relations. These ties have been mutually beneficial to our two countries, phenomenally transforming Kenya's railway, road and port infrastructure, and deepening people to people exchanges,” said Ruto.

Through bilateral cooperation with China, Ruto noted that the Mombasa-Naivasha Standard Gauge Railway, the Nairobi Expressway and many rural roads have been built, opening up the country and making Kenya a key transport hub not just in Eastern Africa but the continent.

Ruto said that the talks with President Jinping at the Great Hall of the People in Beijing, ahead of FOCAC summit, where later agreed to give Kenya's agricultural produce access to the Chinese market.

They also agreed to discuss regional infrastructure projects like the expansion of SGR and the Rironi-Mau Summit-Malaba dual carriageway. 

He said the huge infrastructure demand in Africa calls for stronger collaboration with the private sector to unlock the continent's potential in mineral resources, renewable energy and agriculture.

Kenya will also be seeking support for support on its key projects, for instance, completion of  Standard Gauge Railway (SGR ) phases 2B and 2C, with both Kenyan and Chinese team expected to deliberate on short and medium term recommendations.

The 472km Mombasa – Nairobi SGR was completed under Phase 1, which was then followed by an additional 120km line from Nairobi to Naivasha under Phase 2A and has been operational for several years now.

SGR phase 2B covers about 262km, and runs from Naivasha to Kisumu while 2C is to extend from Kisumu to Malaba, covering 102km and will connect the border town to Uganda.

In April, Kenya hosted the regional SGR cluster meeting for the Northern Corridor Integration Projects (NCIP) in Mombasa, whose objective was to accelerate implementation of SGR by partner States including Uganda, Kenya, Rwanda, South Sudan and the Democratic Republic of the Congo to enhance connectivity with the Port of Mombasa.

The Government will also be seeking support for establishment of Kenya Railways Institute, Special Economic Zones (SEZs) to allow Chinese continue with investments in various sectors including pharmaceutical.

Other projects earmarked for development include Africa Data Centre for iCloud as well as setting up new berths at the port of Lamu.

Under the public private partnership, it has also emerged that more opportunities will be explored, with focus on programmes like Belt and Road Initiatives (BRI), which is geared on making Kenya a major economic hub in the East Africa region.

State House Spokesperson, Hussein Mohamed said on Sunday that Kenya’s involvement in BRI has resulted in transformative infrastructure projects, including SGR, Nairobi Expressway, Kipevu oil terminal and various bypasses in Nairobi.

“President Ruto has been honored with the responsibility of co-chairing a session on ‘pursuing high quality BRI cooperation: a platform for modernization featuring planning building and benefitting together’ at the high level BRI event,” said Hussein, in a statement.

Some of the expected benefits include strategic partnership with China, a joint commitment to building a Kenya-China community, agreement on support for infrastructure development including construction of rural roads across the country, Nairobi Intelligent Transport System, Bosto Dam Water supply project as well as phase III of upgrading of equipment in TVET workshops.

At the same time, the Government will seek to settle pending requests for other projects like Northern by-pass, Muthaiga-Kiambu dualling as well as the Hola-Garissa power transmission lines.

Other areas that Kenya’s interest is focused include continued political, economic, security and technical cooperation.

Kenya also expects to conclude financing agreement for about 15 rural roads, supported by China Development Bank in addition to lobbying to ensure Chinese banks are operational in Nairobi.

On credit insurance, Kenya is expected to engage with Sinosure, a Chinese policy-oriented financial institution, to further expose the country’s public and private sector to trade and investment.

Other areas that Kenya is seeking cooperation is health, which could see development of a pharmaceutical park to produce medicine, vaccines and medical equipment as well as cold storage.

The China-Africa entrepreneurs’ conference will also serve as a platform for African and Chinese leaders to explore investment opportunities in sectors like infrastructure, health, manufacturing, ICT, e-mobility, agriculture and value addition.