China reduces lending to Kenya at the same time Kenya is looking to reduce borrowing

China's lending to Kenya hits a 16-year low as Beijing adopts a more cautious approach.
President Ruto's first full-year budget receives the smallest Chinese loan package in 16 years.
Kenya's public debt soared under President Kenyatta's infrastructure-building drive.

As Beijing adopts a more cautious approach to lending in Africa, where some countries have reached the limit of their borrowing capacity and the prospect of default looms, China's loans for President William Ruto's first full-year budget will be the smallest in 16 years.

Chinese financing for the fiscal year beginning in July will drop to Ksh1.74 billion ($12.7 million) from Ksh29.5 billion ($216.5 million) in the current fiscal year and Ksh71.2 billion ($522.5 million) in 2017, according to Treasury records made public on Tuesday.

According to statistics from the Kenyan Treasury, the State Department for Information Communication Technology & Digital Economy would get a large portion of the country's new budget of Ksh1.74 billion ($1.027 million), with highways receiving the remaining Ksh140 million ($1.027 million).

China has been the largest bilateral creditor to Kenya since 2015 thanks to the country's financing for the construction of huge infrastructure, including roads and a modern railroad, which have mostly benefited Nairobi during the previous ten years.

China, which constructed the Thika Super Highway under previous President Mwai Kibaki's administration and the standard gauge railway (SGR) under President Uhuru Kenyatta, has not sanctioned any fresh investment for a large-scale infrastructure project in recent years.

Additionally, since taking office in September of 2022, the Ruto administration has pledged to lower its rate of borrowing, with foreign loans committed for the new budget falling to Ksh313.8 billion ($2.3 billion) from the current Ksh326 billion ($2.4 billion).

Under the leadership of Dr. Ruto's predecessor, Mr. Kenyatta, who oversaw a significant infrastructure-building drive, public debt skyrocketed.

During Mr. Kenyatta's 10-year presidency, which began in 2013, Kenya's debt increased more than fourfold to Ksh8.66 trillion ($63.6 billion). According to the IMF, the country's significant risk of debt distress was caused by the growth in liabilities.

Kenya has emphasized that it can not disregard its responsibility to repay debt. In 2020, the IMF identified over 20 African nations, including Kenya, as being in or very susceptible to debt trouble.

Lenders have responded by adopting increasingly stringent lending criteria, particularly China Eximbank and China Development Bank, China's two primary policy banks.