Moody’s says Kenya assets risk seizure by Chinese
NAIROBI - Kenya is among countries at the highest risk of losing strategic assets to China over the pile of debt it owes Beijing, global ratings firm Moody’s Investor Service has said in a newly-released report that has raised eyebrows in public finance circles.
Moody’s says in the report that China’s response to sub-Saharan Africa countries facing liquidity pressure has not been uniform or transparent - meaning predictability of credit implications are less clear.
“Countries rich in natural resources, like Angola, Zambia, and Republic of the Congo, or with strategically important infrastructure, like ports or railways such as Kenya, are most vulnerable to the risk of losing control over important assets in negotiations with Chinese creditors,” Moody’s warns.
Such countries are also at risk of being offered liquidity relief at higher resource concessions that only reduce the value of future export earnings.
“Even if debt restructuring alleviates immediate liquidity pressure, the loss of natural resources revenue or other assets is credit negative,” Moody’s adds. Outside sub-Saharan Africa, China got land in exchange for some debt relief in Tajikistan and took control of the Hambantota Port in Sri Lanka. Recent data from the National Treasury show that Chinese debt stood at Sh554.88 billion or 73.4 percent of total bilateral debt of Sh756.28 billion at the end of September.
A large segment of the debt is linked to construction of the Standard Gauge Railway (SGR).
“In general, concentrated exposure to a single creditor, with little transparency about decisions to restructure the terms of the debt, increases rollover risks, weakening the fiscal profile,” Moody’s said. The ratings agency says that for countries with narrow export bases, such as Kenya or Uganda, an increase in external debt associated with China’s lending may not be met with sufficient and stable foreign-currency earnings in the future.
- Daily Nation Kenya