Kampala. China has lent more money to Kenya compared to any other economy in East Africa, according to data from China-Africa Research Initiative (Cari) at John Hopkins University.
The country has borrowed about $9.8b in the past 10 years to grow its transport, communications manufacturing and energy sectors.
Kenya is closely followed by Uganda, which has borrowed about $2.96b in the same period while Tanzania holds $2.34b.
Ethiopia, which is relatively outside the East African Community owes China $13.73b.
Rwanda, South Sudan and Burundi owe China the least amounts – with each holding $289m, $182m and $99m respectively.
According to available data, each of these countries is spending at least 8 per cent of total revenue to service the loans yet they have not shown much impact in terms of real-time growth.
“It is always important to look at whether these projects will generate enough economic activity to repay these loans, as opposed to being seen as merely ribbon-cutting opportunities,” Ms Deborah Brautigam, the Cari director said in notes published along the research.
Uganda’s biggest share of Chinese loans was taken in 2015, drawing more than $2.12b in a single file.
Ethiopia drew its biggest loan in 2013 ($6.6b) while Kenya had its largest in 2014 ($3.7b). Tanzania in 2012 drew about $1.16b.
China Exim Bank has been the go-to financier for the region’s governments, giving out more than $16.3b.
The China Development Bank advanced East African economies more than $6.9b, while other Chinese lenders are currently owed $6.1b, data shows.
In terms of sector funding, the bulk of loans have been invested in transport and energy.
In the last 10 years, Uganda has seen its energy sector receive the highest funding from China, at $1.92b, while the transport sector has absorbed $762m over time.
In Kenya, the transport sector took in $5.55b to finance the new railway line from Mombasa to Naivasha.
Nairobi also took a $597m loan for its power projects, including the $135m for the 55 megawatt solar power plant in Garissa funded by the China Exim Bank.
South Sudan has received $158m for its transport sector to date, and a further $24m for its energy projects.
Tanzania’s energy sector remains the top financed sector funded by Chinese money, at $1.16b.
The country, which has not taken up any Chinese debt under President John Magufuli, has received $552m for its communications sector.
Rwanda’s China debt for transport amounts to $151 million.
However, regional countries seem to have slowed down their appetite for loans from China. Kenya and Ethiopia are the only countries within the region to have drawn loans from the world’s second largest economy.
Ethiopia borrowed $652m last year while Kenya took $64m.
Rwanda and Uganda which borrowed $70m and $85m last borrowed from China in 2016.
However, there are indications that some countries continue to struggle with repayment with some seeking for roll overs.
Last month, Ethiopia became the first country to get its Chinese debt rolled over. A $4b loan, which had been drawn to fund it railway link from Addis Ababa to Djibouti was restructured.
The loan was offered a further 20-year extension, which will see its annual repayments narrow to an affordable level.
“The loan for the Addis Ababa-Djibouti railway, which was meant to be paid over 10 years, has now been extended to 30 years. Its maturity period has been extended,” Prime Minister Abiy Ahmed, announced recently.
Kenya also sought to get a grant as part of the package for its $3.8b loan for its continuing railway projects, as it seeks to manage its debt burden.
Tim Jones, an economist at the Jubilee Debt Campaign, said that the continent debt problem could worsen, especially given the opaque nature in which they are signed.
“Debt problems are worsening. We need new rules to make all lenders publicly disclose loans to governments at the time they are given,” he said.
Kenya, Uganda face debt repayment risk - IMF
Kenya and Uganda are among countries that are at debt risk if they do not put better policies to manage their commercial debt repayments, the International Monetary Fund has warned.
IMF’s sub-Saharan Africa Outlook report says the two countries need to strengthen their capacity to undertake cost-risk analysis of borrowing options and manage repayments on commercial borrowing.
However, in equal measure, the IMF praised Kenya and Tanzania for updating their medium-term debt strategy to address contingent liability risks.