The National Treasury is saving over Ksh27 billion every year after the government negotiated new terms for three loans used to finance the Standard Gauge Railway (SGR).

🇰🇪 Breaking It Down

The announcement was made by Cabinet Secretary John Mbadi, who revealed that the Kenyan government negotiated with China to reduce the cost of servicing three SGR loans, resulting in annual savings of about USD 215 million, equivalent to over Ksh27 billion.

Speaking during the broad-based parliamentary group meeting in Naivasha on Monday, August 10, the CS said the negotiations were conducted bilaterally and were structured to deliver savings without subjecting Kenya to debt restructuring.

"We decided to do something that I think I hear no country has ever done, that we got into bilateral engagement with China. We managed to discuss for mutual benefit to the two countries," Mbadi stated.

📌 What You Need to Know

"We negotiated in a way that would not compromise or even lead to debt restructuring. We managed to get annual savings. Every year, we are saving USD 215 million on the SGR loans, the three of them that we took," he added.

According to Mbadi, the debt deal is part of a wider government strategy to reduce pressure from large external debt obligations and lower the cost of servicing Kenya's debt.

The announcement comes almost a year after the Kenyan government began paying the SGR loan in Chinese Yuan , shifting away from the traditional payment method, in which the country repaid the debt in dollars, in a bid to cut costs.

According to the Treasury, the decision to switch the loan currency to the Yuan is helping to reduce the pressure Kenya has been facing in honouring its debt obligations.

In 2013, Kenya entered into a USD 5 billion (Ksh646.2 billion) agreement with China to fund and construct the Standard Gauge Railway (SGR), one of the largest Chinese-backed infrastructure projects on the continent.

The SGR construction was undertaken from Mombasa to Naivasha in its initial phase, with the project construction now proceeding to the Malaba border through Kisumu.

📰 Source: Kenyans.co.ke