International report shows Kenya faces asset auction over Chinese debt
SGR among projects that could be affected
Moody’s said that China has not been transparent in the debt agreements it has made with most African countries - exposing them to loss of natural resources and strategic national assets in the event of inability to service debt.
The report makes reference to the Sh324 billion Standard Gauge Railway (SGR) project and the port expansion projects as some of the important assets that could be acquired by the Chinese if the loans are defaulted.
“Countries rich in natural resources, like Angola, Zambia, and Republic of the Congo, or with strategically important infrastructure, like ports or railways such as Kenya, are most vulnerable to the risk of losing control over important assets in negotiations with Chinese creditors,” the report reads in part.
The credit rating agency noted that seizure of natural resources or strategic assets would negative affect the debtor-country’s economy through loss of revenue.
“Even if debt restructuring alleviates immediate liquidity pressure, the loss of natural resources revenue or other assets is credit negative,” Moody’s adds.
SGR Phase 2
According to the Central Bank of Kenya, Kenya’s external debt as at March 31, 2018 was Sh2.51 trillion made up of; Sh832.22 billion multinational debt, Sh799.19 billion commercial debt, Sh741.04 billion bilateral debt and Sh140.04 billion guaranteed debt.
Chinese loans contribute to Sh534.07 billion and is expected to grow further by the time the second phase of the SGR is completed (Nairobi-Malaba).
In February, Moody's downgraded the Kenyan government's rating from B1 to B2 - citing growing debt.
JOIN OUR PULSE COMMUNITY!
Eyewitness? Submit your stories now via social or: