China owns 21.3% of Kenya's external debt â" not 70% as reported
Chinese Premier Li Keqiang gestures to Kenya's President Uhuru Kenyatta before their meeting at the Great Hall of the People in Beijing in May 2017. Photo: AFP POOL/ PARKER SONG.
Worried about being up to its ears in debt, Kenyaâs government wants to hire experts to manage its borrowing, local media has reported.
Much of Kenyaâs borrowing in recent years has been from China, US-based news website Quartz said in a July 2018 article.
But the countryâs obligations to Beijing run âmuch deeper than many ordinary Kenyans realiseâ the article said under the headline: âC hina now owns more than 70% of Kenyaâs external debtâ.
Does China account for nearly three-quarters of the money Kenya owes foreign lenders?
Data from Kenyan treasury
Quartz said its source was an article in the Nairobi-based Business Daily newspaper that cited data from Kenyaâs treasury.
Business Daily shared with Africa Check the documents it relied on for its article. These are official statistics that provide more information on the 2018/19 Kenyan budget statement.
They showed that as at 31 March 2018, Kenya owed China KSh534.1 billion, or 72% of the countryâs total bilateral debt of KSh741 billion.
Bilateral debt generally refers to debt loaned by one state to another state, Odongo Kodongo, who has researched Kenyaâs debt, told Africa Check. An example would be Kenya borrowing from Uganda. Kodongo is an associate professor at Wits Universityâs business school.
It therefore is not issued to private sector lenders s uch as banks, he added.
Share of bilateral debt held by China is accurate
Three experts told Africa Check that Chinaâs share of Kenyaâs bilateral debt â" of more than 70% â" was accurate.
Kodongo agreed, as did Prof Indermit Gill and research associate Kenan KarakÃ¼lah from the Duke Center for International Development.
Gill and KarakÃ¼lah said they crosschecked the newspaperâs data against that of the Central Bank of Kenya, while Kodongo used March 2018 data from Kenyaâs treasury.
Bilateral debt is one part of external debt
But while it may be true for bilateral debt, itâs not true for all of Kenyaâs foreign debt. Bilateral debt is just one of three components of external debt, Gill and KarakÃ¼lah said.
External debt is the total public and private debt that a country owes foreign creditors, they explained. It âcovers bilateral debt, multilateral debt and commercial debt. Therefore, Quartzâs article misinterpre ts [this] factâ.
Multilateral debt is owed to international financial institutions such as the African Development Bank, the World Bank and the International Monetary Fund. Commercial debt is money loaned by private organisations, such as banks, for profit.
âAll bilateral debt [is] external debt, but not all external debt [is] bilateral debt,â Kodongo said. External debt also includes privately held international debt such as eurobonds.
It is therefore ânot accurateâ to say that China holds more than 70% of Kenyaâs external debt, Kodongo said.
So, what is Chinaâs share of Kenyaâs external debt?
By Gill and Karakulahâs calculations, Kenyaâs external debt as at 31 March 2018 was KSh2.51 trillion. It was made up of:
- Multilateral debt: KSh832.22 billion
- Commercial debt: KSh799.19 billion
- Bilateral debt: KSh741.04 billion
- Guaranteed debt (that backed by a public body): KSh140.04 billion
Chinaâs share of Kenyaâs external debt is therefore KSh534.07 billion of KSh2.51 trillion.
âKenyaâs debt to China is [thus] 21.3% of Kenyaâs external public debt,â the researchers wrote in an email.
|Why debt levels matter |
Borrowing is useful if it is for investment and not consumption, experts told Africa Check.
How much a country produces and exports matters more than absolute debt levels, Odongo Kodongo, an associate professor at Wits Universityâs business school, said. This is because these are better indicators of a countryâs ability to repay.
The terms of the debt â" its interest rate and repayment period â" are also significant, Duke Center for International Development international development researchers Indermit Gill and Kenan KarakÃ¼lah, said.
Itâs important to note that while Kenyaâs external debt to China almost doubled between 2015 and March 2018, in the same period the countryâs commercial debt grew faster, they added.
Conclusion: China holds just over 20% of Kenyaâs external debt, not 70%
In an article drawing attention to what it said was Kenyaâs rising public debt, US-based website Quartz said âChina now owns more than 70% of Kenyaâs external debtâ.
It cited treasury data used in an article by Business Daily, a Kenyan newspaper.
But the data shows China holds just over 20% of Kenyaâs external debt. We therefore rate this claim as incorrect.
Edited by Lee Mwiti
Want to know why we fact-checked this claim? Read about it in our explainer.
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