Ruto in China: Kenya seeks credit wiggle room to fund SGR
In his China state visit, President William Ruto and his officials are faced with a tricky balancing act as they seek more support from Beijing for Kenya's infrastructure and trade development while ensuring that any new deals do not push up debt levels.
His officials say they are open to try new financing models to fulfil the country's great need to complete stalled projects and extend others. Some of those are the extension of the standard gauge railway (SGR) from Naivasha to Malaba on the Ugandan border, and the expansion of the main highway from Nairobi to Nakuru and on to Malaba.
Dr Korir Sing'oei, Foreign Affairs Principal Secretary, told a press briefing in Beijing on Monday that Nairobi is being realistic about its debt situation.'The key issue has to do with Kenya's fiscal capacity to take on board new facilities, given the fact that we have had challenges with regards to interest rates from some of the debts and the volatility that has increased the debt,' he said.'What we need to do is to agree on a funding model. Because Kenya holds the view that if this railway were to reach Malaba, it would generate enough revenue which would enable it pay for itself. We are trying to persuade our colleagues in China to consider the possibility of a different financial model that is outside the loan arrangement. That conversation has progressed a great deal and we are looking at our counterparts at different models.'The two big ticket projects, the SGR and highway to Malaba, have been on the table for the past year. And, although China has been amenable to taking them on a public-private partnership (PPP) arrangement, Beijing has generally needed more convincing from Nairobi, especially because of Kenya's debt levels.
Kenya took debt from China to finance the first two phases of the SGR from Mombasa to Naivasha. Government officials admit the railway won't make money to repay for itself if it continues stuck in the middle of nowhere, with over $5 billion already sunk into its construction.'It is my view that the Chinese are open to various models that are sustainable. Prudence and fiscal responsibility demands of us to be alive to the fiscal constraints that we operate within. That is why emphasis has been laid on innovative solutions. It all depends on the conversations that are taking place with our counterparts…President Ruto will not engage in a technical discussion with his counterparts because our Treasury experts are already handling those discussions,' the PS said.
While he would not confirm if the financing would be signed during this visit, Dr Sing'oei said Kenya has already endorsed the PPP arrangement and could 'look into ways into which some of the instruments of financing our railway infrastructure, like the railway financial assets and securitising these assets to finance the next phase of development.'For Nairobi, though, debt may not be the most important issue on this trip, especially since Kenya has borrowed more from the World Bank than any other lender in the past three years.
Lin Jian, the Spokesperson for China's Foreign ministry, said the trip is more of a walk down memory lane.'We believe this visit will contribute to deepening China's relations with Kenya, carrying out the outcomes of the Focac (Forum on China–Africa Cooperation) Beijing Summit, building an all-weather China-Africa community with a shared future for the new era, and promoting the solidarity and cooperation of the Global South,' he said on Friday.
President Ruto is arriving in Beijing in the middle of a game-changing geopolitical shift. Initially seen as facing West, he routinely denied the charge, arguing he was looking for friends everywhere.
Read: China's delight as Uncle Sam's once-favourite Ruto comes calling'You know, there are people who want to drive a narrative that it is the East versus the West. We are facing East, facing West. Let me tell you, we are neither facing East nor facing West. We are facing forward,' Ruto said last year, when he made a state visit to the US, the first African leader to be accorded such a status in 18 years.
Now, Nairobi says Ruto won't be a transactional president but one who identifies partners and sticks with them.'President Ruto is coming to China to deepen a friendship. It is not always transactional,' Dr Sing'oei said on Monday. 'It is really also about developing a shared understanding of where we are and where we need to be as two friendly countries.'Deals worth over $500 million are expected to be signed during this visit, and officials confirmed China's support for an integrated transport system and junction improvement project, funding for technical colleges, water sectors and a financing arrangement to build the headquarters of the Ministry of Foreign and Diaspora Affairs.
Kenya says China will be important to continue pushing for debate for reforms in the financing architecture, where lenders like the World Bank give loans at a cheaper rate than they do.
It also wants China to play a bigger role in Africa's peace initiatives, especially in the Horn of Africa and the Great Lakes region, where conflict has intensified.
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