National Treasury Cabinet Secretary Ukur Yattani has denied reports that Kenya risks losing the port of Mombasa to China due to the huge loans that have advanced for the construction of the Standard Railway Gauge – SGR.
According to a statement from Treasury, the CS took issue with a story that was published by a local daily titled: ´China could seize Mombasa Port over Ksh 364bn SGR loan.´
CS Yatani said “the story is not only alarmist, but risks straining relations with development partners and foreign investors.”
He explained that Kenya had entered into a deal with the Export Import Bank of China under three loan agreements to finance and construct the SGR, adding that loans were being serviced as per the agreement.
“The government through the national treasury entered into three loan agreements with the Export Import Bank of China (China EXIM) to finance the construction of the Standard gauge railway (SGR).” Yatani explained. Adding that: “The government through treasury is servicing the SGR loans in accordance with the provisions of the loan agreements and the public Finance Management (PFM) Act 2012.”
He further noted that all external loans from bilateral lenders have pari passu provisions in the respective agreements requiring equal treatment in the servicing of all debts.
Pari-passu is a financing arrangement that gives multiple lenders equal claim to the assets used to secure a loan.
According to the CS the government of Kenya cannot and has not pledged public assets as security for a debt, because such an action would not only violate provisions in its existing loan agreements with other bi-lateral creditors, but more importantly because Kenya treats all creditors, equally.
“The port of Mombasa has no adverse exposure to any lender or category of lender through existing loan agreements with the government.” CS Yatani said.
CS noted that Kenya will continue to honour its debt service obligations to safeguard its credit standing among nations, to attract investments and promote growth and development of its people.