Home Madrid Economy Kenya should renegotiate Chinese rail loan, parliamentary panel says

Kenya should renegotiate Chinese rail loan, parliamentary panel says

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NAIROBI, Sept 24 (Reuters) – Kenya is set to renegotiate the terms of a loan it borrowed from China to build a modern railway line, the parliamentary transport committee said in a report, one of several African countries grappling with a downturn caused by a pandemic and heavy debt.

The East African nation raised its public debt ceiling last year. It took a loan from China to build the $3.2 billion Standard Gauge Railway (SGR), which began operations in 2017.

“The government should initiate the process of renegotiating the SGR loan terms with the lender due to the current economic distress caused by the effects of COVID-19,” the commission said in the report delivered to parliament on Wednesday.

The report also called for the renegotiation of the contract to operate the line. China Road and Bridge Corporation, which built the railway, holds this contract through its Kenyan subsidiary Africa Star Operations.

Any new operating contract should cut costs in half, the committee said.

The transport minister, Chinese embassy or Africa Star did not return calls seeking comment.

The government has forced companies to move their cargo onto the railway to ensure it generates enough cash for operations and loan repayments.

The committee called for cargo owners to be allowed to choose their mode of transport.

Many developing countries have taken out large loans to pay for infrastructure projects under China’s 2013 Belt and Road Initiative, intended to improve China’s trade ties with the world.

In Africa, Djibouti, Egypt, Ethiopia and South Africa all have large Chinese loans, according to a tracker maintained by Washington DC-based think tank the Council on Foreign Relations.

So far, Ethiopia is the only African country to have renegotiated its Chinese debt. In late 2018, China agreed to a debt restructuring that included a loan for a $4 billion railway linking its capital Addis Ababa to neighboring Djibouti. (Editing by Katharine Houreld and Bernadette Baum)