Kenya Seeks Sh368 billion Loan from China to Extend SGR, Despite Losses

By Virginia Mwangi / March 21, 2019



Kenya Abandons Plans to Electrify the Mombasa-Nairobi SGR

The Kenyan Government is back to the negotiating table with China for another loan of around 370 billion shillings to complete the third phase of the standard gauge railway (SGR).

The Kenya Railways Acting Director Philip Mahinga said that the corporation was in negotiations to seek finance for the extension of the railway to Malaba in Busia County.

The SGR, which will be 974-kilometres with the distance from Mombasa to Malaba in Busia County, will leave Kenya more heavily indebted to the Chinese country with obvious concern of the country succumbing to China.

The SGR was only able to give an annual revenue return of 10 billion shillings despite using up 12 billion shillings to finance its annual operations in the same year.

The taxpayer has hence had to part away with one billion shillings every month to finance the SGR that brought a loss of 2 billion at the end of the year not forgetting that it was expected to also repay a monthly servicing of its loan which amounts to 36 billion shillings. For the SGR to be viable, it needs to make returns of over 48 billion yearly to sustain itself and repay its loan.

The SGR should have been in a position to sustain itself and repay its loan in its current state before another loan can be added onto the taxpayer’s shoulders, unless the Government does not care for the countries assets.

2019 has been predicted as a scary year for Kenya as the grace period of five years given by the Chinese bank, from 2014 May to 2019 July 2019, expire. The total amount loaned for the SGR project was 324 billion shillings. Kenya was expected to service the 324 billion shillings on a monthly basis of 36.85 billion shillings, the amount is like to double as the interest will spike after the grace period expires to a feared 82.85 billion shillings.

The Country’s public debt is currently estimated to be over 5 trillion shillings which is 56 percent of Kenya’s Gross Domestic Product (GDP).

The 385 kilometers SGR runs from Mombasa to Nairobi’s neighboring Syokimau in Machakos County and cost the Country 324.1 billion shillings which should be repaid within the next 15 years. Kenya stands losing strategic assets if and when it fails to repay the loan within the stipulated timeline.

“The movement of trains from Mombasa to western Kenya needs to be secure from terrorists and other challenges. We ask the Chinese government to support us in this area,” Mr. Mahinga said.

Concern is still rife on Kenya’s ability to repay the loans as the Government led by the son of Jomo is seen to be throwing the country assets to the Chinese considering the corruption in the Government. Question remains, which is the next surety for the Country’s next loan from China?





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