Kenya Railways is considering raising passenger fares for children on the Standard Gauge Railway (SGR) trains from Mombasa to Nairobi in an effort to raise more revenue to pay off its debt.
Kenya Railways is said to be working on a proposal that will scrap off the subsidy offered to children between the ages of three and eleven that has been effective since May 2017.
Children are currently paying 1,500 shillings for first class and 500 shillings for economy class tickets compared to adults who pay 3,000 shillings and 1,000 shillings for first class and economy class respectively.
The review follows closely after Kenya Railways also raised cargo charges by up to 79 percent in November. However, the review is subject to approval by the Ministry of Transport.
Kenya is expected to pay over 56.7 billion shillings which is equivalent to 0.7 percent of the economy for the Standard Gauge Railway this year, according to Budget estimates presented by the Treasury. The review in children fares is in a bid to lessen the burden of taxpayers in paying the Chinese SGR operator.
Paying back for the railway debt is set to reduce Kenya’s disposable income by 8.8 percent considering that the five-year window period expires in 2019.
The loan, whose interest is 3.6 percentage points above the six months average of London Inter-Bank Offered Rate (Libor) which serves as an international benchmark, is to be repaid in 15 years with a grace period of five years.
President Uhuru’s administration has largely contracted debt from China since 2014 to build much-needed roads, bridges, power plants and the SGR. This started after Kenya became a lower middle-income economy, locking her out of highly concessional loans from development lenders such the World Bank Group.
There have been speculations that considering the amount that Kenya owes for the construction of SGR, Kenya could lose the port of Mombasa to the Chinese government if Kenya Railways Corporation (KRC) defaults in the payment owed to Exim Bank of China.
This should not come as a surprise since, in December 2017, the Sri Lankan government lost its Hambantota port to China for a lease period of 99 years after failing to show commitment in the payment of billions of dollars in loans. In September 2018, Zambia also lost its international airport to China over debt repayment.
The move by Kenya Railways to increase children’s passenger fares is therefore highly welcomed considering the stakes.
As Kenya continues to struggle with the ever-growing public debt, 2019 will be no different as the repayment of the Standard Gauge Railway set to increase by nearly three times.
Kenya’s public debt now starts at 5 trillion shillings or 56 percent of the country’s gross domestic product (GDP) with analysts saying it is likely to hit 6 trillion shillings by the end of 2019.
The largest lender to Kenya is China and one of the largest project ever funded by a loan from China is the Standard Gauge Railway (SGR) which runs from Mombasa to Nairobi.
After the completion of the SGR, Kenya was given a grace period of five years from May 2014 and it expires in July this year. This means the repayment of the loan is likely to spike from 36.85 billion shillings currently to nearly 82.85 billion shillings.
Kenya took a loan of 324.01 billion shillings from Exim Bank of China that was meant to facilitate the construction of the 385 kilometers of Mombasa-Nairobi SGR line that was set to be repaid within a period of 15 years.