Kenya Faces Hefty KSh 1.7 Billion Fine Over Unpaid SGR Loan
Kenyan taxpayers are now facing a KSh 1.7 billion penalty due to a default on the Standard Gauge Railway (SGR) loan from the China Exim Bank.
This new financial burden has sparked public concern as it underscores the high cost of Kenya’s reliance on external debt, particularly for large-scale infrastructure projects like the SGR, which was initially expected to bolster economic activity and reduce debt strain.
The National Treasury recently released its Annual Debt Management Report for the financial year 2023/24, revealing that Kenya Railways had defaulted on a staggering KSh 167.5 billion. This amount forms a significant portion—62%—of the KSh 266.5 billion owed by state corporations. As outlined in the report, the loan default incurs a 1% penalty on the unpaid amount, translating to KSh 1.68 billion in additional costs.
“The SGR loan accrued and not paid in FY 2023/2024 amounted to KSh 167.5 billion,” the Treasury’s report states, as cited by Business Daily. The penalty has since pushed the SGR debt to KSh 737.5 billion, marking a 36.8% increase from the original KSh 539 billion initially issued by China Exim Bank.
The SGR line, stretching from Mombasa to Naivasha, was anticipated to be self-sustaining, with revenue from operations intended to service the loan starting in 2020. However, revenue has been insufficient, shifting the financial burden to the Kenyan taxpayer. “SGR loans to Kenya Railways Corporation amount to Sh737.5 billion, which accounted for 61% of the total on-lent loans,” the Treasury report noted.
Adding to the debt strain is the depreciation of the Kenyan shilling against the US dollar. In January 2024 alone, the cost of SGR loan repayment rose by KSh 14 billion, driven by currency fluctuations. According to the World Bank, Kenya is now required to pay $536.9 million (approximately KSh 84.7 billion) in 2024, a considerable increase from the KSh 70.2 billion paid during a similar period in 2023, as the shilling now stands at KSh 157 to the dollar.
With this steep penalty and rising debt obligations, the SGR project has once again ignited debate over the sustainability of Kenya’s debt policy and its impact on the average citizen.
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Kenya Faces Hefty KSh 1.7 Billion Fine Over Unpaid SGR Loan
