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Kenya eyes Sh390bn bond to fund SGR extension to Malaba
An SGR passenger train departs from the Miritini station in Mombasa, bound for Nairobi on July 7, 2025. To fund the SGR extension to the Ugandan border, the State could issue two bonds to raise about $3 billion (Sh387 billion) for the railway line.
The government is eyeing a 15-year mega bond worth Sh390 billion to fund the extension of the standard gauge railway (SGR) from Naivasha to Malaba, signalling China’s unwillingness to finance the project.
Roads and Transport Cabinet Secretary Davies Chirchir said the State is considering issuing a securitised bond, where investors would be paid using the Sh39 billion collected annually from the Railway Development Levy (RDL), a 1.5 percent tax imposed on all imported goods.
Kenya is seeking alternative ways to finance infrastructure projects amid its rising debt burden, with a focus on public-private partnerships (PPPs) and securitisation, where bonds are backed by income-generating assets.
To fund the SGR extension, the State could issue two bonds to raise about $3 billion (Sh387 billion) for the railway line.
Mr Chirchir said the government is weighing options between a bond and a loan from development banks, both expected to carry a 15-year maturity period.
Kenya had previously explored securing funding from the United Arab Emirates (UAE) to complete the regional railway after China initially showed little interest. However, it later revived its push for Chinese funding during President William Ruto’s visit to Beijing in April.
The decision to turn to bond financing for the SGR expansion underscores China’s reluctance to bankroll the project amid Beijing’s scaled-down infrastructure lending.
“We have a good stream [of income] from the Railway Development Levy, which is ring-fenced to build the railway. But if you look at it from a cash flow perspective, it’s not enough to build the project within two or three years,” Mr Chirchir said during a press briefing on Friday.
“We will basically look at financial markets and available instruments...leveraging, of course, the [RDL Fund] revenues. A railway should attract long-term borrowing, and we’re looking at a 15-year facility; the two percent RDLF charge is sufficient to support us,” he added.
The railway connecting the port of Mombasa with landlocked neighbours — part of China’s Belt and Road Initiative — currently ends in Suswa, about 468 kilometres short of the Ugandan border, after a funding hitch stalled further construction in 2019.
An aerial view of the end of the standard gauge railway at Murtoto in Suswa, where the line ends.
Photo credit: Robert Gichira | Nation Media Group
Speaking after a meeting with transport ministers from Uganda and South Sudan in Nairobi, Mr Chirchir said both Nairobi and Kampala are keen to break ground on the next phase of the SGR, but remain constrained by the absence of a ready financier.
Under the regional plan, Uganda is expected to fund the 272-kilometre stretch from Malaba to Kampala, with further extensions to the border with South Sudan, from where South Sudan will build its section to Juba. The new line would eventually connect both hinterland economies to the Port of Mombasa, strengthening regional trade integration.
The Exim Bank of China, which financed 90 percent of the $3.6 billion cost of the 729-kilometre SGR from Mombasa to Naivasha, withdrew from financing the Naivasha–Malaba phase over concerns about Kenya’s debt sustainability and the line’s commercial viability beyond Naivasha.
A cargo train arrives at the Mombasa SGR Miritini Station on October 24, 2025.
Photo credit: Wachira Mwangi | Nation Media Group
During President Ruto’s visit to Beijing earlier this year, Exim Bank reportedly agreed in principle to support the project on condition that Kenya shoulders 30 percent of the total cost.
The introduction of a private sector component in the SGR extension is expected to ease the accumulation of Chinese debt, addressing Beijing’s concerns over whether the line can generate enough revenue to service its loans.
The first phase of the SGR, linking Mombasa and Nairobi, was completed in 2017 at a cost of $3.8 billion (Sh490.9 billion). This included civil works, stations, and rolling stock, largely financed through a 90 percent loan (about $3.23 billion) from the China Exim Bank, with the Kenyan government covering the remaining 10 percent.
Between 2014 and 2017, the government allocated Sh106 billion for the procurement of the initial batch of locomotives and wagons.
Exim Bank also financed Phase 2A of the SGR — the 120-kilometre line from Nairobi to Naivasha — completed in October 2019 at a cost of $1.5 billion (Sh193.8 billion).
The line currently terminates in Suswa, where its abrupt end has undermined plans to efficiently move cargo to landlocked neighbours including Uganda, Rwanda, Burundi, and the Democratic Republic of Congo.
The standard gauge railway abruptly ends at Murtoto in Suswa.
Photo credit: Robert Gichira | Nation Media Group
With Kenya’s debt ceiling tightening, the government has now turned to private capital to bridge the financing gap for the Naivasha–Malaba extension.
Under a securitisation model, projected future revenue streams, such as those from the Railway Development Levy Fund, are packaged into marketable securities and sold to investors to raise upfront cash.
Uganda, meanwhile, is yet to secure financing for its section. However, its State Minister for Transport, Fred Byamukama, said the country has made “very good progress” toward groundbreaking.
