U.S. ignores red flags on Kenya’s debt in fixation to match China’s role
The United States government has rolled up its sleeves in a bid to match up to China’s huge infrastructure undertakings in Kenya.
The newly found vigor by the world’s economic leader is however against renewed scrutiny of the country’s prudence in debt management and sustainability.
This from the World Bank and the International Monetary Fund (IMF) multilateral lenders who incidentally sit under the nose of the US administration in Washington.
America’s participation in Kenya’s economy has until now taken the back seat as the government looks more East than West.
China has however doubled down on its engagement with Kenya especially on infrastructure development.
In light of the squeeze, the United States has initiated an interest and influence salvaging project, recently mirrored in the controversial construction of the Nairobi-Mombasa express way.
Previous reports pointed to the freeze of the project’s backing but U.S. ambassador to Kenya Kyle McCarter rubbished them as false claims
“If we are involved in infrastructure projects, we are going to be the most competitively priced, we will offer the best quality and offer jobs to the most Kenyans ever,” he said.
“We may do road number one but will train Kenyans to do road number two,” he added.
The remarks by the new outspoken ambassador are on the back of criticism over the viability of huge capital infrastructure undertakings which are believed to only saddle the government with more debt weight.
The proposed 473 kilometer Nairobi-Mombasa expressway has for instance raise eyebrows among the majority of observers who fail to count any material benefit from the over Ksh.300 billion projects which runs parallel to China’s recently completed Ksh.368 billion Standard Gauge Railway (SGR) line.
At the same time, the pair of the World Bank and the IMF has raised the alarm on the country’s fiscal management with the latter revising up Kenya’s debt profile risk from low to moderate in 2018.
Even so, McCarter has shrugged off public debt concerns insisting of the sustainability of Kenya’s debt stock.
“We are not involving debt with no payback. All debt is not created equal and is not a bad thing if you have a way to pay it back. We are putting forth projects that make sense to Kenyans,” he retaliated.
Independent sources who spoke on the basis of anonymity say the US is seeking to clap back on China’s influence to reclaim its one time dominant influence in the country whose depletion is well captured in Kenya’s recent borrowing trends and balance of trade.
Citizen Digital’s perusal of Treasury’s document show a decline in the US financial support for Kenya as that of China explodes.
At the end of June 2009, bilateral debt to the US and China represented a mere 1.1 and two percent or an equivalent Ksh.5.3 billion and Ksh.9.8 billion of Ksh.502.3 billion in net outstanding sovereign debt.
Fast forward to June 2018 data, China’s share of bilateral debt has ballooned to 22 percent or an equivalent Ksh.599.1 billion as that from the United States dips down to be bulked up with debt from other partners at seven percent.
The thinning support is mirrored in the description of projects where China has funded the construction of the infrastructure projects such as the SGR and the Eastern & Southern bypasses with the US financing the lesser capital intensive Agriculture, Defence and Housing segments.
Nevertheless, the US green buck has remained the most dominant in debt issuance scooping up the majority 71.7 percent of issued credit in 2018 against the Chinese Yuan stake of 6.2 percent.
On the balance of trade, China leads the way by way of both exports and import growth with the US imports dipping.
The value of total exports to the Chinese mainland from Kenya have grown to Ksh.11.1 billion in five years while Kenyan imports from the country have jumped to a significant Ksh.370.8 billion.
Kenyan imports from the US have meanwhile slumped to Ksh.53.2 billion in five years even as exports improve to Ksh.47.3 billion from Ksh.38.3 billion in 2014.