The government has dismissed claims that the Port of Mombasa could be taken over by the Chinese government if it defaulted on the SGR loan.
In a statement by Treasury CS Ukur Yatani on Monday, the government said the port has no adverse exposure to any lender or category of lenders through existing loan agreements.
This comes after the Star ran a story on a report by the Auditor General which showed the port of Mombasa could be under the control of the Chinese if the government defaults on the Sh364 billion SGR loan.
However, Yatani said, "There is absolutely no risk of China or any other country to take over the port of Mombasa."
According to the Auditor General's report tabled in Parliament, the assets of Kenya Ports Authority were used as collateral for the Standard Gauge Railway loan.
The report revealed Kenya waived its immunity in the event of a legal dispute linked to default of servicing the loan.
The borrowers – KPA and Kenya Railways Corporation - gave up claim to any immunity from legal proceedings or any of their assets.
“KPA assets are exposed to the risk of takeover by the lender since the authority signed the payment arrangement agreement,” the audit reads.
However, Yatani said the government through the National treasury was servicing the SGR loan in accordance with the provisions of the loan agreements and the public Finance Management Act.
"The Export Import Bank of China loans due in respect of the SGR project are part of the public debt paid through consolidated fund in accordance with the PFM Act 20112," he said.
Yatani said loans for SGR project are not paid and cannot be paid through any other fund or by any other entity without the approval of parliament.
"External loans from bi-lateral lenders have pari passu provisions in the respective agreements requiring equal treatment in the servicing of all debts," the CS said.
He said the government thus cannot and has not pledged public assets as security to a debt as such an action would violet provisions in the existing loan agreements with other bi-lateral creditors.
"For avoidance of doubt, Kenya treats all creditors equally," he said.
The CS maintained that the port is a strategic asset financed by government with support from multilateral and bilateral development partners.
"Kenya will continue to honor its debt service obligations to safeguard its credit standing among nations, attract investment and promote growth and development of its people," the CS said.