Kenya has dropped its request for debt relief after Chinese banks said they were not willing to offer any debt restructuring to Kenya. This comes weeks after it was revealed that Chinese banks had frozen fund disbursements to local projects. According to a report that appeared in a local daily, the National Treasury is now paying the Exim Bank of China which funded the Standard gauge Railway project fully.
The National Treasury now says that Kenya will not make any more requests for debt relief. “There is no request to the Chinese government for an extension of the moratorium on debt. Kenya is servicing its debts with the Exim Bank in line with the DSSI agreement,” National Treasury Principal Secretary Julius Muia said.
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In January 2021, China and other rich countries under the Debt Service Suspension Initiative (DSSI) had given Kenya a six-months debt repayments relief. However, Kenya was looking to have additional time off.
According to the International Monetary Fund (IMF), Kenya had also sought an extension of the debt relief from G20 countries to December. These included Belgium, Canada, Denmark, France Germany, Italy, Japan, Republic of Korea, Spain and the USA.
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By last month, China had already frozen all active loans to Kenya due to ongoing struggle to repay debts and pleads for extension of repayment holidays. China had lent Sh. 758 billion to Kenya as at April 2021. This left Chinese-funded projects facing a cash crunch, with contractors reporting delayed payments from banks like Exim Bank of China. However, Kenyan officials at the National Treasury came out to deny any knowledge on debt suspension by China. “Not true,” Finance Cabinet Secretary Ukur Yatani was quoted as saying on the disbursement freeze.