The first tranche of the SGR loans, the Sh319 billion borrowed by the Kenyatta administration from the Chinese Exim Bank in August 2013 will mature in August 2023.
Sources at the Transport ministry said the long grace period was given to enable the Kenya Railway (KR) Corporation to accumulate enough money towards the principal payment.
Out of the first tranche of the SGR loans, a total of Sh213 billion funded the construction of the tracks while the remaining Sh106 billion was used to buy the first set of locomotives and wagons.
President Uhuru Kenyatta and former Prime Minister Raila Odinga look set to exit the political scene before Kenya starts repaying the billions of shillings spent on the standard gauge railway (SGR).
The two leaders used the charged political campaigns that preceded yesterday’s polls to publicly claim credit for either planning or executing what has been dubbed Kenya’s most expensive public infrastructure project.
The Business Daily can reveal that the first tranche of the SGR loans, the Sh319 billion borrowed by the Kenyatta administration from the Chinese Exim Bank in August 2013 will mature in August 2023, having come with a 10-year grace period.
Sources at the Transport ministry said the long grace period was given to enable the Kenya Railway (KR) Corporation to accumulate enough money towards the principal payment.
Out of the first tranche of the SGR loans, a total of Sh213 billion funded the construction of the tracks while the remaining Sh106 billion was used to buy the first set of locomotives and wagons. The loans attract interest at a floating rate of 360 basis points above the London Interbank Offered Rate (Libor).
The Libor — currently at 0.429 per cent — is the average interest rate at which a select group of large, reputable banks that participate in the London interbank money market can borrow unsecured funds from other lenders. This would translate to an annual interest charge at the rate of 4.029 per cent if Kenya were to begin the loan repayment from today.
But the country will start remitting the principal sums from August 2023 with the repayment period being spread up to 40 years.
This means the loan will be paid up in 2063, long after most of the current crop of political leaders will have exited the scene.
The winner of yesterday’s presidential contest, on the other hand, can only be in office up to 2022. Mr Kenyatta is seeking a final five-year term while Mr Odinga has indicated an intention to serve for only one term.
The law, however, does not block Mr Kenyatta from seeking re-election in 2022 if he loses. Similarly, the law does not bar Mr Odinga from running again if he loses or from seeking a second term if he wins. Whichever the case, the SGR loans represent a long-term commitment that will outlast the two leading presidential candidates who have used the iconic infrastructure to galvanise political support.
Throughout the two months of heated campaigns, none of the public projects rolled out in the recent times featured in the political rallies as frequently and prominently as the SGR.
The climax of it all came on May 31 when President Kenyatta rode on the first SGR train, christened Madaka Express, from Mombasa to Nairobi.
The two top presidential candidates would however not stop at that as they continued to entertain their supporters by publicly downplaying each other’s role in the mega project.
A transport ministry official, speaking to the Business Daily anonymously said “too much politics” was threatening to mess up the loan repayment plan.
This was apparently in tacit reference to a directive issued in June by President Kenyatta asking Kenya Railways to Keep Madaraka Express fares at Sh700 for economy and Sh3,000 for first class. A consultant hired to advise the KR on the feasible tariffs recommended Sh1,200 for economy and Sh4,000 for first class ride.
The government has also borrowed Sh155 billion from the Chinese Exim Bank to fund the Nairobi-Naivasha section of the SGR and another Sh370 billion for the line to Kisumu. Estimates show the cost of the railroad and the rolling stock will cross the Sh1 trillion when it connects Malaba.
