Debt-ridden Kenya should renegotiate Chinese rail loan, parliamentary panel says

Kenya should renegotiate the terms of a loan borrowed from China to build a modern railway line, parliament’s transport committee said in a report, one of many African countries grappling with a pandemic-induced downturn and heavy debt.

The East African nation raised its public debt ceiling last year. It took a loan from China to build the $3.2 billion standard gauge railway (SGR), which started operations in 2017.

“The government should initiate the process of renegotiating the loan terms of the SGR with the lender due to the prevailing economic distress occasioned by the effects of COVID-19,” the committee said in the report given to parliament on Wednesday.

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The report also urged renegotiation of the contract for running the line. China Road and Bridge Corporation, which built the railway, holds that contract through its Kenya subsidiary Africa Star Operations.

Any new contract for operations should cut costs by half, the committee said.

The transport minister, the Chinese embassy or Africa Star did not return calls seeking comment.

The government has been forcing businesses to move their cargo on the railway to ensure it generates enough cash for operations and loan repayments.

The committee called for cargo owners to be allowed to choose their mode of transport.

Many developing nations have taken large loans to pay for infrastructure projects under China’s 2013 Belt and Road Initiative, intended to improve China’s trading links to the world.

In Africa, Djibouti, Egypt, Ethiopia and South Africa all have large Chinese loans, according to a tracker maintained by the Washington-D.C. based think-tank the Council on Foreign Relations.

So far, Ethiopia is the only African nation to have renegotiated its Chinese debt. In late 2018, China agreed to restructure debt that included a loan for a $4 billion railway linking its capital Addis Ababa with neighboring Djibouti.