Kenya set to renegotiate Chinese rail loan, parliamentary panel says

NAIROBI, Sept. 24 (Reuters) – Kenya is set to renegotiate the terms of a loan borrowed from China to build a modern railway line, Parliament’s transport committee said in a report, one of several countries Africans 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 should initiate the process of renegotiating the terms of the SGR loan 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 called for 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 respond to calls for comment.

The government has forced companies to move their cargo on the railroad to ensure it generates enough cash for operations and loan repayments.

The committee asked that owners of goods be allowed to choose their mode of transport.

Many developing countries have taken out large loans to finance infrastructure projects under China’s 2013 Belt and Road Initiative, 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 the debt which included a loan for a $ 4 billion railroad connecting its capital Addis Ababa to neighboring Djibouti. (Edited by Katharine Houreld and Bernadette Baum)

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