Kenya to use Beijing forum to secure Sh368bn SGR loan

BEIJING, CHINA

Kenya is set to use the forthcoming second Belt and Road Initiative (BRI) forum in Beijing to secure a loan for the completion of the third phase of the standard gauge railway (SGR), Kenya’s ambassador to China Sarah Serem has said.

Speaking on Tuesday on the sidelines of the international symposium on China-Africa Cooperation and people-to-people exchange, Ms Serem downplayed fears that incurring more Chinese debt is detrimental to Kenya’s economy.

“Leaving the SGR halfway will hurt the economy and that is why as a government we are coming for another loan during the upcoming BRI forum late this month. Kenya knows what is good for its people. Hence we have to invest in matters which will enhance development of the country,” said Ms Serem.

SH368BN LOAN

Ms Serem said a Kenyan delegation already met with Exim Bank and China’s Commerce and Foreign Aid ministry officials to conclude negotiations on the second loan of Sh368 billion.

In March, Transport Principal Secretary Esther Koimett and Kenya Railways Acting Managing Director Philip Mahinga led a delegation to Beijing to finalise talks on securing the loan to finance the Naivasha to Kisumu SGR stretch.

It is estimated that the stretch to Kisumu will cost Sh350 billion to complete.

The Mombasa-Nairobi line was built at a cost of Sh327 billion while the Nairobi to Naivasha stretch, which is about two months to completion is set to gobble up Sh150 billion.

If the loan is granted, the SGR project will have cost the Kenyan taxpayers Sh845 billion.

'DEBT TRAP'

Ms Serem denied claims the Chinese are using loans to trap African countries in unpayable debt with prized state assets used as collateral.

“On the issue of debt trap, it all depends on how you model your facilities. What will the road or railway do? It is like walking in a bank like Kenya Commercial Bank to give you a loan, if you use it wisely, it will bring many fruits and that is the concept of BRI. As a government, we invest on areas that boost our economy,” said Ms Serem.

She said Kenya will use the BRI forum to show how the completion of the Mombasa-Nairobi railway has impacted the economy.

“No country can develop without putting up an element of infrastructure and opening up for more investments and BRI has prioritized these areas,” said Ms Serem.

'GAME-CHANGER'

Just last month, President Uhuru Kenyatta and his Ugandan counterpart Yoweri Museveni affirmed the two countries’ commitment to stick to the original plan to build the railway all the way to Kampala, an indication that Kenya would seek yet another loan to build the SGR from Kisumu to the Malaba border post.

Kenya and Uganda briefly differed over financing the cross-border SGR with China’s Exim Bank insisting that Kampala must get Nairobi’s commitment as a pre-condition for securing a loan for the line to Kampala.

Kenya’s fears over the mounting public debt has seen Nairobi put priority on the line to Kisumu port as part of the plan to have Uganda and Rwanda move their goods via Lake Victoria, dimming prospects for a seamless SGR connection between the port of Mombasa and Kampala.

During Mr Museveni’s visit to Mombasa, Mr Kenyatta said he was “now keen on the joint development of the SGR line to Kampala” which his Uganda counterpart called a “game-changer.”

The SGR loan repayment details have remained a tightly-guarded government secret.

A promise by the President to make public the contract with the Chinese has not yet been honoured.

This move for the government to seek funding from China has revived debate on Kenya’s ballooning debt even as taxpayers face more pressure to fund Jubilee’s flagship project.