NAIROBI, Sept. 24 (Reuters) – Kenya is set to renegotiate the terms of a loan borrowed from China to build a modern railway line, the parliamentary transport committee said in a report, one of several African countries struggling with a pandemic-induced slowdown and heavy debt.
The East African nation raised its public debt ceiling last year. It took out a loan from China to build the $ 3.2 billion Standard Gauge Railway (SGR), which began operation in 2017.
“The government is expected to begin the process of renegotiating SGR’s loan terms with the lender due to the current economic distress caused by the effects of COVID-19,” the committee said in the report delivered to parliament on Wednesday.
The report also encouraged the renegotiation of the line’s operating contract. China Road and Bridge Corporation, which built the railway, holds the contract through its Kenyan subsidiary Africa Star Operations.
Any new operating contract is expected to cut costs in half, the committee said.
The Minister of Transport, the Chinese Embassy or Africa Star did not return calls seeking comment.
The government requires companies to haul their cargo on the railroad to ensure it generates enough cash for operations and loan repayments.
The committee called for freight owners to be allowed to choose their mode of transportation.
Many developing countries have taken out large loans to finance infrastructure projects under the Belt and Road Initiative of 2013, aimed at improving China’s trade ties with the world.
In Africa, Djibouti, Egypt, Ethiopia and South Africa all have large Chinese loans, according to a tracker maintained by the Washington DC-based think tank, the Council on Foreign Relations.
Ethiopia is the only African country to have renegotiated its Chinese debt so far. At the end of 2018, China agreed to restructure its debt which included a loan for a $ 4 billion railroad connecting its capital Addis Ababa to neighboring Djibouti. (Editing by Katharine Houreld and Bernadette Baum)
