Kenya looks to extend Chinese rail loan by 30 years

The SGR’s Nairobi station (Macabe5387/CC BY-SA 4.0)
Kenya will ask China for 30 more years to pay back the $5bn it owes for the standard gauge railway (SGR) connecting Mombasa to the interior of the country, Bloomberg reports. The agreed repayment period had been 20 years.

Speaking in the Kenyan parliament, Kipchumba Murkomen, the transport minister designate, said payments to China’s Export–Import Bank were “choking the country”.

“If we can manage to renegotiate to 50 years, then it will ease the burden,” he said.

He also pledged that the contract that Kenya signed with China would be made public.

The speech came a week after it was disclosed that Chinese banks had fined Kenya $11m in the year to June over missed repayments.

However, Kenyan economist Gerrishon Ikiara told Voice of America that Kenya had good relations with China, and that would help with negotiations.

He said: “Friendly countries always negotiate. Because China may have its own issues it may have borrowed itself, so it’s also looking at its economy and asking what’s our ability to adjust to the terms Kenya wants. That’s why friendly relations are very important.”

Kenya’s debt distress is partly a result of the economic effects of the pandemic, and partly of the commercial performance of the SGR. The Mombasa–Nairobi section of the link, which opened in 2017, made a loss of $28m in the 12 months to June. This part of the line cost some $3.6bn, 90% of which was met by a loan from Export–Import bank.

The country’s national debt stood at $71bn in June, equivalent to 68% of its GDP. This is in the middle range of debt owed by African countries.

The SGR presently runs to the town of Naivasha, about 120km northwest of Nairobi. The line was to have continued to the Ugandan border, but when Kenya asked for funds to extend the line to the Lake Victoria port of Kisumu in September 2018, China said a commercial viability study should be carried out on the entire line, reflecting Beijing’s more cautious approach to overseas infrastructure investment.

That 267km section of the SGR was to have been built by China Communications at a cost of around $3.8bn.

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