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Chinese loans for Mombasa to Malaba railway hit Sh1 trillion

Total Chinese loans to Kenya for the construction of the Mombasa to Malaba standard gauge railway will hit the Sh1 trillion mark after Exim Bank of China expressed interest in funding the third phase of the project.

The lender will pump in Sh490 billion to build the railway between Kisumu and Malaba to link Kenya and Uganda, bringing the total cost to Sh1.02 trillion.

This comes at a time when Kenya’s annual debt repayment is set to hit Sh618.5 billion next year, which will see the Treasury spend an estimated Sh40 out of every Sh100 collected from taxpayers on servicing the ballooning loans.

The bill represents a 38.5 per cent jump from Sh446.4 billion spent on public debt this year, compared to projected 12 per cent growth in tax collection; a key indicator of the country’s ability to repay.

The bank is already financing the first leg of the railway from Mombasa to Nairobi at a cost of Sh380 billion with completed work standing at over 90 per cent currently.

The second phase between Nairobi and Naivasha, a stretch of 120 kilometres, will cost Sh150 billion. The higher cost between Nairobi and Naivasha has been attributed to harsh terrain.

As a result, the cost of tunnels will take up 23 per cent of the total cost estimated at Sh18.2 billion. The tunnels will cut through Rift Valley escarpments, making design work more expensive.

Exim Bank will also fund construction of a modern Sh14 billion port on the shores of Lake Victoria in Kisumu as Kenya targets a bigger maritime trade stake with its land locked neighbours.

Kisumu is seen as a critical hub for trade with neighbouring countries such as Tanzania, Uganda, Rwanda, Burundi and the entire Great Lakes region.

Kisumu port registered robust business activity for decades, helped by a reliable railway system and maritime vessels which ferried cargo to ports such as Mwanza and Bukoba in Tanzania and Jinja and Port Bell in Uganda.

The first phase of the new railway will be commissioned next year in June.

The railway is one of Kenya’s Vision 2030 flagship projects.

It is expected to ease transport as well as strengthen cooperation among East African Community member states and promote trade and the region’s economic development.

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