World Bank Warns Kenya Over Chinese Loans

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The Word Bank has warned Kenya that its growing intake of Chinese loans could put the nation’s economy at risk.

World Bank lead economist for Kenya, Apurva Sanghi, says Kenya’s debt burden could rise to “unsustainable levels,” if the country continues its shift towards Chinese loans over traditional sources.

 

‘Unsustainable levels’

According to research carried out by the World Bank, China’s loans to Kenya increased by 54 percent each year between 2010 and 2014. At the same time, loans from traditional sources like France and Japan have declined. Researchers point out that some of these Chinese loans come with higher interest rates than those from Kenya’s other sources.

The rate of borrowing from China is also a concern, according to Sanghi. He says Kenya’s debt to China rose to Sh262 billion ($2.6 billion) in June last year, up from Sh82.9 billion ($821 million) a year earlier and Sh14.7 billion ($146 million) in 2010.

“Kenya still has a heavy debt burden and China’s loans can bring debt to unsustainable levels. Some of China’s loans are non-concessional, which can raise debt-to-gross domestic product (GDP) levels quickly,” he said.

 

China’s growing interest in Africa

China’s growing investment in Africa has come in for criticism from various ‘Western’ powers and international voices. Last week the country moved to defend the construction of its first overseas naval base, in East Africa’s Djibouti. China insists the base is a supply facility but some have accused the country of trying to expand its military reach.

China’s interest in Africa’s natural resources has come in for criticism too, despite the fact it invests less than the US and various European countries.

Another complaint has been that Chinese firms are filling African nations with its own migrant workers. This is a common misconception about China’s involvement in Kenya, despite a separate World Bank study revealing it isn’t the case.

“Contrary to the popular belief that Chinese companies only hire Chinese workers, 93 percent of companies report hiring Kenyan employees; private enterprises are more likely to hire locals than state enterprises,” the report says.

 

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By VictorgrigasOwn work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=20655431