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Economy

Uhuru seeks Sh370bn China loan for SGR link to Kisumu

A section of the Mombasa-Nairobi standard gauge railway. file photo | nmg
A section of the Mombasa-Nairobi standard gauge railway. file photo | nmg 

Kenya is seeking an additional Sh370 billion ($3.59 billion) Chinese loan to extend the standard gauge railway (SGR) from Naivasha to Kisumu, pushing the construction cost to Sh847 billion.

President Uhuru Kenyatta on Monday led a Kenyan delegation in making a formal request for additional funding from China Exim Bank.

The money will finance the construction of the third phase of the SGR, a 270km line between Naivasha and Kisumu.

“The funding request will undergo normal procedure of approval and Premier Li has promised to give it the adequate consideration and urgency it deserves,” State House Spokesman Manoah Esipisu told reporters in Beijing, where the President has been attending a trade conference.

Together with Sh327 billion spent on the first phase between Mombasa and Nairobi and Sh150 that the bank extended recently for the Nairobi-Naivasha section, the Chinese will have pumped a total of Sh847 billion in the venture.

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This excludes interest on the loans that would push the overall cost beyond Sh1 trillion. The additional funding implies that each kilometre of the third phase of the railway will cost Sh1.37 billion compared to about Sh1.5 billion for the Nairobi-Naivasha phase.

Kenya built the Mombasa-Nairobi line at a cost of Sh692 million per kilometre.

The Chinese loan used on the project is expected to cross the Sh1 trillion mark by the time the Kisumu section is extended to Malaba, a distance of 107 kilometres according to Kenya Railways.

By comparison Uganda, which is also negotiating a Chinese loan for the Malaba-Kampala section, estimates its unit cost at Sh865.2 million per kilometre.

Mr Esipisu Monday appeared to play down the economic viability queries saying completion of the Naivasha–Kisumu section would influence neighbours to take up the project.

The Transport ministry said train tariffs will adequately cover the cost of loans, adding that it will operate profitably.

The ministry said trains will charge half the current public buses fares for the third-class package.

In a series of agreements reached between Mr Kenyatta and Chinese Prime Minister Li Leqiang, Kenya also allowed the Chinese to manage security and operations of the railway between Mombasa and Nairobi.

The meeting was on the sidelines of the Belt and Road Forum, a programme by the Chinese to expand influence through trade by building infrastructure in more than 60 countries in Asia, Europe and Africa.

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