Interview: Chinese loans help spur Kenya's growth, says official

China is offering Kenya generous financial support to help the East African nation accelerate its development and improve people's livelihood.

Guo Ce, the Economic and Commercial Counsellor at the Chinese Embassy in Nairobi, told Xinhua that Beijing wants to see Kenya develop its infrastructure and better the general welfare of the people through employment creation.

Currently, Kenya ranks the first among African countries receiving China's preferential loans.

By the end of 2015, according to Guo, the number of loans to Kenya provided by the Export-Import Bank of China (China Exim Bank) had reached 26, most of which are preferential loans with lending rates far below the international market rate and with a longer grace period.

China Exim Bank is a state bank solely owned by the Chinese government and focuses on the cooperation between China and African Countries. All the loans of China Exim Bank are preferential or breakeven because of the bank's nature and objective.

"The projects that received the loans cover various areas, including transportation, electricity, healthcare, communications, geothermal and youth empowerment," Guo said.

For example, the drilling of geothermal wells at Olkaria region in the Great Rift Valley is among the projects the Chinese government is financing.

So far, 145 geothermal wells have been drilled, increasing the electricity generating capacity of Kenyan grid by 20 percent and lowering the integrated price by 30 percent.

"Ban Ki-moon, the UN Secretary-General, praised this project as the model for the 'South-South Cooperation'," said Guo.

The Standard Gauge Railway (SGR) is another Chinese-funded project.

"The railway is evaluated as a main engine for (Kenya's) economic growth," said Guo.

In 2015, the project helped boost the growth rate of Kenya's construction sector to 13.6 percent and is currently providing 30,000 jobs. It will also reduce logistics costs by 40 percent and open up the huge market potential of cross-boundary transportation inside Kenya.

The Garissa Solar Power Plant Project, which is also under Chinese financing, is expected to offer 625,000 off-grid households access to affordable electricity, as well as to provide 1,000 jobs for the local community.

Chinese financing is also benefiting Kenya's micro enterprises. By the end of 2015, China Development Bank (CDB) had granted 273 million U.S. dollars special loans to micro enterprises covering 29 sub-projects in 14 sectors, with interest rates lower than the Central Bank of Kenya's benchmark rate.

"In addition, CDB commits a longer term preferential loan worth 600 million dollars to Kenya's National Treasury, with interest rate far below that of the sovereign bonds and commercial lending," said the diplomat.

Those preferential loans will be allocated to 151 projects in transportation and energy sectors, benefiting Kenya's infrastructure and Kenyan livelihood, he added.

China's sincere financing support has been warmly welcomed by the government and the general Kenyan public.

But, there are unfounded fears that the Chinese loans would burden Kenyans for generations.

"That is not true. At Kenya's request, China offers loans with rates normally below the commercial loan charges to support the government's Vision 2030 development strategy," said Guo.

As mentioned above, most of the Chinese loans are preferential ones with lending rates far below the international market rate and with a longer grace period, he stressed.

In a more specific case, there are also false claims regarding the details of the Nairobi-Naivasha segment of the Standard Gauge Railway project in terms of calculation of the interest and the amount of the insurance premium.

Guo said such claims are not correct and are derived from partial understanding.

"I would like to emphasize again that, as I know, the financing conditions of the above project are more favorable than most of the international export credit," said Guo. Endit