The Jubilee government tapped over half a trillion shillings from Chinese lenders, led by the Export-Import Bank of China, to fund the construction of the Standard Gauge Railway project.
As such, the country was expected to start loan repayment in January 2020 after the lapse of a five-year grace period that Beijing had given Kenya.
Despite making profits, the country’s biggest infrastructure project since independence has been making losses instead of profits.
For instance, the operational costs for SGR stood at KSh18.5 billion in the year to June against sales of KSh15 billion.
As such, the government of Kenya defaulted on a Chinese loan prompting the lender to fine the country to the tune of KSh 1.312 billion.
“This (KSh1.312 billion) relates to the cost of default on interest at one percent of the due amount,” the Business Daily reported.
The default came in a year when Kenya had asked for an extension of the debt repayment moratorium from bilateral lenders, including China, by another six months to December 2021, saving it from committing billions to the Beijing lenders.
But the lenders, especially the Exim Bank of China, opposed Kenya’s application for a debt repayment holiday in a standoff that delayed disbursements to projects funded by Chinese loans.
This comes at a time when President William Ruto has returned port operations to Mombasa further dwindling the fortunes of the project.
The Jubilee administration built the railway at a cost of KSh billion between Mombasa and Nairobi and KSh150 billion between Nairobi and Naivasha, while the cost from Naivasha to Kisumu was projected to cost KSh380 billion before the lack of funding caused a change of plans, resulting in upgrading of the meter gauge railway line.
