IMF Sounds Alarm on Kenya’s Economy Amidst Concerns Over China’s Downturn

The IMF has issued a warning to Kenya and other Sub-Saharan countries regarding the potential impact of China’s economic growth decline on their economies.

Thursday’s press release announced reduced levels of borrowing from China by Sub-Saharan countries, resulting in the need to seek other sources of funding. The IMF has shed light on the sizable drop of Sh151 billion in infrastructure loans, the largest of its kind in 20 years. Despite being one of the top five countries to profit from China’s loans, including the funding for the Standard Gauge Railway initiative, Kenya is now prompted to identify supplementary means of financing.

“Chinese loans to the region rose rapidly in the 2000s, with the country’s share of total Sub-Saharan African external public debt jumping from less than 2 per cent before 2005 to 17 per cent by 2021,” read the statement in part.

The IMF’s recommendation consists of a series of measures, encompassing the stimulation of trade relations among African nations, the imposition of tax revisions, and the utilization of mineral exports as a vehicle for economic progress. The cautionary notice coincides with the recent collaborative talks between President William Ruto and Chinese President Xi Jinping intended as a progression of China’s Belt and Road Initiative (BRI).

It remains unclear whether Ruto successfully secured a deal with the Jinping administration for the USD 1 billion loan to fund suspended projects. However, the President made commendable strides in his dealings with private companies, of which investment agreements totalling Sh688 billion were formed. Important among them is the venture to bring into existence Konza Medical City, which received a handsome funding of Sh24.2 billion.