“Chinese financial institutions provide financial support for China-Kenya cooperation in accordance with internationally accepted commercial and market principles, alleviating Kenya’s lack of funds and increasing Kenya’s capacity for independent development,” a spokesman said.
The documents also revealed that the terms of the loan were more expensive than expected, said Tony Watima, an economist from Nairobi, the Kenyan capital. The interest rate on the loan was higher than what is typically found in a deal between two governments, he said.
People walk across the newly commissioned Liwatoni Floating Pedestrian Bridge in Mombasa, Kenya, another project funded and built by China.Credit:AP
The agreement also stipulated that if Kenya defaults on another external loan, the standard clause on the railway loan will automatically kick in, forcing Kenya to repay the loan and any interest accrued immediately and giving China the right to withhold further disbursements. .
“Despite being negotiated as a government-to-government project where a symbiotic relationship is expected, all the risks were taken by the Kenyan taxpayer,” Watima said. “Whether the project pays for itself or defaults, the financiers are guaranteed their return.”
The deal was signed by the government of President Uhuru Kenyatta; Ruto was vice president at the time and part of the government that launched and vigorously defended the project.
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But problems with the railway piled up and China was hesitant to finance the last stretch, which would connect with neighboring Uganda.
The contract stipulated that all goods purchased with the railway proceeds would preferably come from China.
In order to make the railway profitable, Kenyan authorities have issued a directive that all incoming freight at the port of Mombasa must be transported by train – a move that has sparked massive protests, multiple lawsuits and rising unemployment. In the run-up to the elections in August, Ruto promised to review the project. When inaugurated in September, he reversed the directive in an effort to restore thousands of jobs, especially in Mombasa.
On Sunday, Kipchumba Murkomen, the cabinet secretary for transportation, announced on Twitter that he is releasing the deal as part of the new government’s campaign promises.
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But observers said the Ruto government should publish the full contract so activists and the public can investigate the deal. That would reveal what the authorities have offered as a guarantee to get the loan and could reveal whether the deal was filled by Kenyan officials and Chinese contractors, said Van Staden of the China Global South Project.
If they release the full details, “it would likely increase the pressure to renegotiate the loan,” he added. “For incoming governments dealing with loans from their predecessors, this could set an interesting precedent.”
This article originally appeared in The New York Times.
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