China fines Kenya over $10.8M for defaulting on railway loan

By Andrew Wasike

NAIROBI, Kenya (AA) - Kenya’s external debt on Thursday ballooned after China fined the East African country 1.3 billion shillings ($10.8 million) for defaulting on loans on a much-touted but controversial railway project.

According to Treasury documents seen by Business Daily, an English daily in Kenya, the fine “relates to the cost of default on interest at one percent of the due amount.”

Taxpayers in Kenya have been forced to pay back the huge loans owed to China from their pockets as the revenue currently being generated by the Standard Gauge Railway (SGR), Kenya’s biggest infrastructure project, falls short of meeting the annual operational costs and also paying back the loans.

According to the government, the SGR generated 15 billion Kenya shillings ($123.9 million) in profit in the financial year 2020-2021 against an operational cost in the same period of 18.5 billion Kenya shillings ($152.8 million).

Since 2014, Kenya has been taking huge loans from China to fund its infrastructure projects such as roads, clean power generation plants, and its biggest project, the Standard Gauge Railway.

Kenya’s external debt reached $36.4 billion this June, according to data from the Central Bank of Kenya.

Then-Kenyan President Uhuru Kenyatta in 2017 officially launched the Chinese-built $3.8 billion Standard Gauge Railway (SGR) and made an inaugural trip on the 472-kilometer (293-mile) railway line.

According to the government, the railway has created more than 30,000 direct jobs and an additional 10,000 indirect ones.