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Zawya
17-06-2025
- Business
- Zawya
Kenya banks on Panda bond to fund SGR to Malaba
Kenya has kicked off the process of issuing its first Panda bond as it seeks to plug financing gaps ahead of extending its standard gauge railway (SGR) from Naivasha to Malaba at the border with Uganda – a project heavily reliant on Chinese support. A Panda bond is a sovereign facility issued in the Chinese domestic market and denominated in Yuan Renminbi (RMB), targeting Chinese investors and institutions. Kenya mulls issuing it on the Shanghai Stock Exchange, seeing it as a useful path to fetch new monies for big-ticket projects. National Treasury and Economic Planning Cabinet Secretary John Mbadi says the plan is to diversify Kenya's external financing sources.'We are in the process of actualising, raising more funds through Sukuk and even the Panda bond,' Mr Mbadi told journalists after presenting the 2025/26 budget statement to Parliament on Thursday, referring to sovereign bonds issued in Arab and Chinese markets respectively.'We're diversifying. We're even going to the UAE for other bonds. We don't want to confine ourselves to specific bonds like it has been previously, because there would be serious risk in the event of certain turbulence in those particular markets.'While Mr Mbadi did not disclose the exact purpose of the Panda bond proceeds, sources familiar with the matter say the Yuan-denominated facility is specifically aimed at bridging the funding shortfall for the SGR extension project, seeking to raise at least $1.5 billion. This week, Musalia Mudavadi, Prime Cabinet Secretary and Foreign and Diaspora Affairs Cabinet Secretary, said Kenya was banking on Chinese support to ensure the bond is floated at the start of the next fiscal year.'Panda bond discussions have started and Kenya looks forward to the support of China,' he said after meeting with Chinese counterpart Wang Yi in Changsha, the capital of Hunan province in southern china. China has long stopped issuing concessional loans to African countries but hasbeen gradually opening up to public-private partnerships, grants and permitting foreign governments to fetch funds via sovereign bonds. Kenya had initially agreed with China to co-finance the project, each contributing 30 percent of the required funds, with a consortium of private investors expected to cover the rest. But Nairobi has since expressed difficulty in raising its share and requested additional Chinese support. During President William Ruto's state visit to Beijing in April, the two countries signed a deal to jointly finance the 475-kilometre rail from Naivasha to Malaba, where it is expected to link with Uganda's own SGR extending to Kampala. I also underscored the importance of concluding discussions on financial cooperation before the end of June 2025 as a critical step forward,' Mr Mudavadi said in a dispatch after a meeting with Wang Yi on Tuesday. Lack of a rail link between Kenya and Uganda has meant that most cargo from the Mombasa port is transported by road to Uganda, Rwanda, Burundi, South Sudan and the Democratic Republic of Congo. This overreliance on road transport increases both time and cost. But financing constraints in both Kenya and Uganda have long delayed efforts to complete the Naivasha–Kampala railway connection, pushing both governments to court new financiers for their respective sections. China was the key financier of the first two SGR phases—from Mombasa to Nairobi, and then from Nairobi to the Naivasha dry port—through loans from the China Export-Import (Exim) Bank. The 729-kilometre stretch was built by the China Road and Bridge Corporation, a state-owned firm, at a total cost of about $5 billion. China pulled out of the Malaba extension after Naivasha, citing concerns over its commercial viability and Kenya's rising debt, which raised the risk of loan default — including on Chinese credit. After years of seeking alternative financing, Kenya returned to Beijing, leading to the April agreement in which China will finance only up to 30 percent of the costs, a sharp drop from the 90 percent it had provided for the earlier phases. The Panda bond is expected to cover part of Kenya's reduced contribution. The Treasury has also increased the railway transport budget by Ksh12.8 billion ($99 million) to Ksh38 billion ($293 million) in the 2025/26 fiscal year, up from Ksh25.2 billion ($195 million) in the current year, signalling renewed investment in the sector. If successful, Kenya would become only the second African country after Egypt to access the Chinese capital market through a Panda bond. Cairo raised $480 million via such a bond in October 2023. With concessional funding drying up — following the expiry of an International Monetary Fund (IMF) programme in March — bonds issued in China, Japan, or the UAE appear more attractive, especially as Eurobond yields remain high. As of March, Kenya's total public debt stood at $87.8 billion about 71 percent of GDP, placing the country at high risk of debt distress. International lenders have urged Nairobi to slow down on borrowing, especially for large infrastructure projects. © Copyright 2022 Nation Media Group. All Rights Reserved. Provided by SyndiGate Media Inc. (
Zawya
12-06-2025
- Business
- Zawya
Kenya, China to finalise financing deals ‘before end of June'
Kenya says it intends to thrash out finer details with China financing infrastructure projects before end of June, signalling pursuit of a project seen as crucial for improving trade and transportation. Prime Cabinet Secretary and Foreign and Diaspora Affairs Cabinet Secretary Musalia Mudavadi said he had directly appealed to Chinese counterparts to speed up the deals meant to extend the Standard Gauge Railway and widen the main highway to Malaba. Mr Mudavadi is in China and, on Tuesday, met with Chinese counterpart Wang Yi, on the sidelines of the Ministerial Meeting of Coordinators on the Implementation of the Follow-up Actions of the Forum on China-Africa Cooperation, the main cooperation platform between China and African countries. But Mudavadi had travelled to Changsha in southern China with a view to finalising financing agreements on which both countries had agreed in principle back in April, when President William Ruto toured Beijing on a state visit. At the meeting with Wang, Kenya's top diplomat said it is 'fundamentally important' that the deals on financial cooperation be thrashed out before end of June, potentially targeting the new financial year as the start timelines for implementing the projects.'On Economic Partnership Cooperation Framework, Kenya is consulting internally and should be ready before end June. Therefore, it is important for the technical teams to meet and begin preparations for bilateral negotiations which will ultimately to more access to the Chinese market for Kenyan goods and services.'After the state visit, President Ruto agreed with the Chinese, in principle, to construct the standard gauge railway from Naivasha on to Kisumu and Malaba. But there financing details were to be agreed. Initially, the proposal was a shared costing with Kenya footing some 30 percent, the Chinese to take another 30 while a private consortium to take up the balance in an overall arrangement that involved the public-private partnership (PPP). Kenya has since proposed that its share of the burden be lessened with an uptake of more Chinese funding. Overall, however, Kenya and China had signed up to 15 Memorandums of understanding (MOU), most of them tied to improving trade and infrastructure. They included the Framework Agreement on Economic Partnership for shared Development which constitutes collaboration on sustainable development of the manufacturing industry, agricultural transformation and improving Kenya's competitiveness in the global market. The agreement is to guide the facilitation of trade, inclusive growth, coordination of supply chain and the digital economy. They also signed a MOU on cooperation in the Railway sector where there is to be a review of the Railway sector laws, regulations and Policies as well as the development of Railway technical and operation standards. The MOU could guide the planning and subsequent advancement and development of railway infrastructure to cover locomotives, rolling stock and railway operational management as part of the multimodal transport. A dispatch from the Chinese Foreign Ministry was not specific on the deals but indicated that Wang had affirmed China's willingness 'to work with Kenya in implementing the consensus reached by the two Presidents and strengthen bilateral relations.'This trip, however, was Mudavadi's clear-the-air opportunity. In the wake of the state visit, Americans legislators had criticised Kenya for turning its back on Washington, after Ruto criticised the US unilateral trade tariffs while on Chinese soil. Mudavadi had travelled to Washington soon after that State Visit in what he said was to elaborate on Kenya's pursuit of all alliances with those who boost its interests. In Changsha, Mudavadi said Kenya was 'very happy' with the outcomes of the state visit, especially the elevation of comprehensive strategic partnership to 'all-weather Kenya-China Community with a Shared Future for the New Era.' © Copyright 2022 Nation Media Group. All Rights Reserved. Provided by SyndiGate Media Inc. (
