Kenya moves closer to seal EPA deal with EU, while also seeking $1bn loan from China

As Kenya is moving closer to sealing an Economic Partnership Agreement (EPA) with the European Union, the East African economic powerhouse has also announced the possibility of a $1bn loan from China that could be used to help pay off a $2bn Eurobond repayment that is due in June next year.
Kenya’s economic partnership deal with the EU will grant the East Asian country’s exports duty-free status and unlimited access to the 27-member market bloc. As the deal will now be presented to the parliaments of both sides for ratification before it subsequently enters into force, Kenya government on Monday (25 December) asked for the support of the East African Community (EAC). The EU is Kenya’s second-largest trading partner and its most important export market. Experts also say that a safeguard contained in the EPA allowing a return to stiffer taxes in case of dumping threats is the sweetener in the EPA, whereby this anti-dumping policy may give the EU edge over China in East Africa.
In a related but separate development, the Governor of the Central Bank of Kenya (CBK) has recently suggested that the East African country could be about to conclude terms for a $1bn loan from China. This softening of President William Ruto’s line on China may have come as a surprise to many, as during his election campaign in 2022, Kenya’s president railed against Chinese-financed loans used to fund a variety of infrastructure projects agreed by his predecessor, Raila Odinga. Ruto blamed these loans for contributing to Kenya’s large and growing pile of debt that currently stands at more than $68bn, around two-thirds of its gross domestic product. While analysts believe Kenya needs the fresh $1bn loan to repay the maturing Eurobond and avoid defaulting, the move is likely to bring China’s activities in Africa and its alleged so-called “debt trap diplomacy” into renewed focus.