Did China Fine Kenya Ksh1.3 Billion? Govt Responds

the Treasury termed a report carried by a local daily as erroneous, the headline alarming and that Kenya has never failed to settle its debt obligations.

Did China Fine Kenya Ksh1.3 Billion? Govt Responds
The SGR Madaraka Express train at Kibwezi station, Makueni County. /NAIROBI NEWS

Outgoing Treasury Cabinet Secretary, Ukur Yatani, has denied reports that surfaced on Thursday, October 13 that Kenya was fined Ksh1.3 billion by China for defaulting on the Standard Gauge Railway (SGR) loans.

In a statement, the Treasury termed a report carried by the Business Daily as erroneous, the headline alarming and that Kenya has never failed to settle its debt obligations.

The CS added that the country has not had any debts accumulated in 10 years to suggest tough times in recouping its debts.

"We wish to state categorically that Kenya has never defaulted on the settlement of its debt service obligations to any of its creditors, nor has any creditor filed or reported any claim of default on debt service payments on facilities extended to the Government of Kenya.

Treasury Cabinet Secretary, Ukur Yatani. /FILE

"Furthermore, Kenya has not accumulated any debt arrears in decades to suggest difficulties in debt servicing," read the statement in part.

The Treasury added that Kenya would not be flagged by financial institutions outlining the SGR loan repayments model.

The government assured the country's creditors, development partners, investors and the general public that Kenya's financial position is sound and robust.

"As a country accessing international financial markets to raise resources, Kenya undergoes frequent independent sovereign rating reviews whose outcomes are published widely. At no time has Kenya been flagged as a country defaulting on its external debt obligations.

"It is also important to note, that all public debt, including the SGR loans are paid from the Consolidated Fund in accordance with the Public Finance Management Act, 2012. Debt service is a first charge on the Consolidated Fund and takes precedence over other forms of expenditure," Treasury added.

The report revealed that the Chinese banks fined Kenya Ksh1.312 billion in the year ended June for loan defaults. Kenya tapped over half a trillion shillings from Chinese lenders, led by the Export-Import Bank of China, to fund the construction of the SGR from Mombasa to Naivasha.

Taxpayers have been forced to shoulder the burden of the SGR loans because revenues generated from the passenger and cargo services on the track were deemed not enough to meet the operation costs, which reportedly stood at Ksh18.5 billion in the year to June against sales of Ksh15 billion.

SGR posted an operating loss of Ksh3.4 billion and wired Ksh22.7 billion in loan repayments in the year to June.

China in August handed the country a big blow when it excluded the East African nation from a loan relief this year, as part of its plans to support the poorest countries in Africa.

Chinese Foreign Minister Wang Yi stated that the programme was aimed to support countries that were struggling to repay their debts.

The deal announced last week will see Beijing waive 23 matured interest-free loans for 17 unnamed African countries, which are classified as least developed countries.

He revealed that Kenya was left out of the deal as it was classified as a lower-middle-income country, which does not sit well with the Beijing scheme.

Former President Uhuru Kenyatta and China's President Xi Jinping During a Past Meeting. /FILE