Identifier
Created
Classification
Origin
06NAIROBI3256
2006-07-27 13:38:00
UNCLASSIFIED
Embassy Nairobi
Cable title:  

Chinese Make Only Concessional Loans to Kenya

Tags:  EFIN EAID KE 
pdf how-to read a cable
VZCZCXYZ0000
PP RUEHWEB

DE RUEHNR #3256 2081338
ZNR UUUUU ZZH
P 271338Z JUL 06
FM AMEMBASSY NAIROBI
TO RUEHC/SECSTATE WASHDC PRIORITY 3279
INFO RUEHXR/RWANDA COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
UNCLAS NAIROBI 003256 

SIPDIS

DEPT FOR AF/EPS/HASTINGS,
DEPT FOR EB/OMA/DETWILER
TREASURY FOR INTERNATIONAL DEBT POLICY/DONOVAN

SIPDIS

E.O. 12958: N/A
TAGS: EFIN EAID KE
SUBJECT: Chinese Make Only Concessional Loans to Kenya

REF: State 106631

UNCLAS NAIROBI 003256

SIPDIS

DEPT FOR AF/EPS/HASTINGS,
DEPT FOR EB/OMA/DETWILER
TREASURY FOR INTERNATIONAL DEBT POLICY/DONOVAN

SIPDIS

E.O. 12958: N/A
TAGS: EFIN EAID KE
SUBJECT: Chinese Make Only Concessional Loans to Kenya

REF: State 106631


1. Summary: China has extended or agreed to extend to the
GOK a total of Ksh3.54 billion ($45.5 million) in
concessional loans since 2002 for road and hospital
projects. Non-concessional foreign borrowing by the GOK
fell 5.5% from 2004 to 2005, and the GOK appears to be
relying on domestic lending to finance its budget deficit.
End Summary.


2. During President Kibaki's August 16-21, 2005 visit to
China, the PRC agreed to provide Ksh3.2 billion ($43.5
million) in concessional loans for developing rural power
distribution and telecommunications networks. On January
23, 2006, Finance minister David Mwiraria signed the
agreements with the Chinese Export-Import bank for the
Ksh1.8 billion ($24.5 million) loan to the Kenya Rural
Telecommunications Development Project and the Ksh1.4
billion ($19 million) for the Kenya Power Distribution
System Modernization and Strengthening Project. The GOK
will pay 2% interest on the telecommunications and power
distribution project loans, but the other terms are not
available.


3. The GOK also signed a 10-year loan with the Chinese
government equivalent to Ksh50.9 million (US$0.69 million)
in May 2002 to upgrade Eldoret Hospital. Disbursement of
two road sector loans equivalent to Ksh98.6 million
(US$1.34 million) started in 2002 and will end in 2018.
Four more Chinese road sector loans equivalent to Ksh185
million (US$2.5 million) will be disbursed between 2008 and

2023. These Chinese loans are interest-free, but the
payment deadlines are unclear. All the road loans are used
to fund contracts for Chinese construction companies to do
the work.


4. The 2006 Economic Survey states that in 2005, the GOK's
outstanding external debt fell 5.5% to Ksh157.7 billion
($2.13 billion). France was the leading creditor with
53.6% of the debt. At least 80% of the total debt is loans
from OECD countries. The remaining 20% are loans from
Spain, Switzerland, Saudi Arabia, China, Kuwait and Korea
totaling Ksh31.4 billion (US$424 million),but no breakdown
by country is available.


5. (U) Post is not aware of any recent non-concessional
foreign borrowing by the GOK, which has preferred to borrow
from local sources to cover its budget deficits in the last
year or two.

Hoover