Kenya Insensibly Eyes Another 380 Billion Shillings Debt for SGR

Kenya is set to borrow a 380 billion shillings debt to fund the construction of the Naivasha-Kisumu second phase of the Standard Gauge Railway.

According to the James Macharia, the Transport CS, he will head to China for the signing of the deal early September.

The deal will further sink the country into debt as China is already financing Phase 2A of the SGR running from Nairobi to Naivasha, which is valued at more than 150 billion.

One can only imagine what this means for the common mwananchi as the government’s appetite for borrowing seems insatiable.

In December 2017, the Central Bank of Kenya released a report that placed the government’s internal debt at 2.22 trillion shillings with the external debt standing at 2.35 trillion shillings. The 2013 billion-shilling borrowing in February 2018 pushed the debt to more than 4.8 trillion shillings.

The soaking in of the fresh debt will push the debt to more than 5.18 trillion shillings! What does this mean for Kenyans? Assuming the Kenya’s population is 48 million, each Kenyan owes international lenders approximately 108 000 shillings.

The question is, will Kenya get value for money for the accumulated debts? Hardly. It is yet to begin paying the first SGR loan of 319, which will mature in 2023.

There is need for more infrastructure in Kenya, that much is true, but is accumulating debts an economically wise decision? Consider the Ethiopian SGR project for instance.

Funded by the Chinese loan, the Ethiopian SGR costs 3.4 billion shillings for a line running for 756 kilometers. Mark you, the railway line is electrified and is way longer than Kenya’s 476 kilometers running from Mombasa-Nairobi, which was valued at 3.2 billion shillings. The former should be more expensive yet the difference is negligible.

The Kenyan line is not electrified and the best reason the government gave for the inflated cost was that the terrain called for several tunnels, bridges, land compensation and the need to handle more cargo than the Ethiopian SGR.

According to the mid July 2017 report of SGR’s 2017/2018 financial year, the standard gauge railway made a loss of 9.89 billion shillings. The line averaged a loss of 750.7 million per month. The loss was attributed to low cargo business.

On the other hand, the government says the SGR will make a 5.08 billion-shilling profit in the next financial year. But then again, but at the end of the end, it is just hoping as their reason is banked on sensitizing people that the line is beneficial for their cargo businesses.

That said, putting things into perspective gives a projection that Kenya will take centuries to clear the rising debt owed to the Chinese bank.