China given advantages in loan for Kenyan rail project, contract shows
- Beijing got preferences in financing the construction of a railway in Kenya eight years ago, a project that is part of its Belt and Road Initiative
- The Kenyan transport minister says the current debt repayment schedule is choking the country’s revenues
The Kenyan government has disclosed some details of loan agreements with a Chinese bank that show Beijing got an upper hand in financing the construction of a railway eight years ago.
The agreement with the Export-Import (Exim) Bank of China stipulated that most of the construction materials for the Standard Gauge Railway – Kenya’s most ambitious and expensive project since 1963 and part of the Chinese Belt and Road Initiative – be sourced from China.
Further, the contract noted that goods and services procured for the construction of the railway be free from taxation by the Kenyan government.
Kenya took three loans for the construction of the railway running from the port city of Mombasa to the capital Nairobi with an extra extension to Naivasha, a town in Central Rift Valley. But tough conditions diluted one concessional loan of the US$1.6 billion deal, and two other loans were mostly given at market rates.
China was also given a legal advantage with articles that stipulate, in case of disagreements among the parties, that arbitration would take place in Beijing, the documents show.
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“If no settlement is reached through friendly consultation, each party shall have a right to submit a dispute to the China International Economic and Trade Arbitration Committee for arbitration,” the loan contract says.