This archive report was first published on 2 July 2021.
Published on July 2, 2021, Business Daily reported that China has halted the disbursement of loans to Kenya, citing discomfort over the country's request to extend the debt repayment holiday to December from an earlier deadline of June.
As a result, Chinese-funded projects are facing a cash crunch, with contractors reporting delayed payments from banks like Exim Bank. Payment to contractors working on Chinese projects, and paid under the direct method, have delayed since last month.
The direct method involves Kenyan firms with Chinese loans sending notices for supplier payments to Chinese banks through the Treasury.
Kenya had initially received a six-month debt repayment relief from China and other rich countries under the Debt Service Suspension Initiative (DSSI) in January this year.
Now, Kenya is seeking deals to suspend debt service with the rich nations under the Paris Club and other creditors, including China, covering the six months to the end of December 2021.
The G20 countries, including Belgium, Canada, Denmark, France, Germany, Italy, Japan, Republic of Korea, Spain, and the USA, had rescheduled payments of KSh32.9 billion in principal and interest due between January and June to the next four years with a one-year grace period.
China, being a G20 member and a signatory to the deal, has sought to negotiate its debt relief deals separately, but applying the same terms as the G20 countries while reserving the right on size and which loans will attract the moratorium.
China is one of Kenya's biggest foreign creditors, having lent KSh758 billion as of April 2021 to build rail lines, roads, and other infrastructure projects in the past decade.
