Written By Lisa Murimi
Venezuela’s economic collapse, spurred by overreliance on China, offers a stark warning for countries like Kenya, which has heavily borrowed from China to finance infrastructure projects.
In the 2000s, Venezuela’s former President Hugo Chávez secured billions in loans from China in exchange for oil.
As global oil prices plummeted and China’s demand for oil slowed, Venezuela’s revenues from oil exports collapsed.
From a high of $73 billion in 2011, revenue plummeted to $22 billion by 2016.
Compounded by mismanagement and political instability under Chávez’s successor, Nicolás Maduro, Venezuela’s economy spiraled into crisis.
By 2014, Venezuela faced severe shortages of food and medicine, leading to an exodus of nearly eight million people.
China, now facing its own economic challenges, halted further credit to Venezuela, leaving behind a trail of unfinished projects.
Kenya’s situation, while different, bears similarities that warrant caution. Kenya has borrowed significantly from China, with loans exceeding $8 billion.
A large portion of this debt was used to fund the Standard Gauge Railway (SGR), a flagship project aimed at boosting the country’s transport infrastructure.
However, the SGR has not generated the expected returns, raising concerns about the country’s ability to repay its loans.
Moreover, the International Monetary Fund (IMF) has flagged Kenya’s rising debt levels, leading to stricter fiscal conditions that may hinder economic growth.
As China’s economic growth slows and its foreign lending policies tighten, Kenya could face a similar fate to Venezuela if it continues to rely heavily on Chinese financing without diversifying its economic base.
The lesson from Venezuela is clear: overdependence on a single economic partner can have dire consequences.
