Transport Committee Calls For State to Renegotiate SGR Loan Deal with China
Kevin Namunwa  |  Sep 28, 2020

Legislators now want the Kenyan Government to renegotiate with China on outstanding loans for the Standard Gauge Railway(SGR) and operational costs including the price of wagons.

The transport committee in parliament asked the state to renegotiate its deal with China on how the loan will be repaid.

The new line, constructed by the China Road and Bridge Corporation (CRBC) and financed by the Chinese government, has been running huge losses since its inception with the coronavirus pandemic only worsening the situation.

David Pkosing, Chairman of the Parliamentary Transport Committee says MPs want the government to seek new terms for the $4.5 billion (KSh 488 billion) loan used to put up the SGR.

“We also recommended that the entire loan framework should also be renegotiated, the original loan framework now with COVID-19 and, of course, Kenya and the world will never be the same again with this effect of COVID-19. That loan should be renegotiated downwards or agreed on even extending the time upon which we should have paid the loan,” Pkosing said.

As per the current rates, Kenya pays Ksh 108 million every month to China’s Africa Star Railway Operation Company to run the railway. Since 2017, Kenya has failed to meet its monthly repayments.

This is what has pushed legislators to call for renegotiations between Kenya and China concerning the loan repayment. Parliament wants the monthly cost to be brought down to Ksh 65.1 million and wants to engage China on how to repay the loan.

While China has entered into a loan renegotiation with Angola, economists rule out the same for Kenya.

Angola is seen as an oil exporter, rich in minerals; thus, its debts are commodity-backed. This is as opposed to the Kenyan situation where there are no commodities-implying a high loan default risk for China.

The SGR carried more than 19,000 passengers and 421,000 tons of cargo between Nairobi and Mombasa in July 2020 when Kenya lifted the ban on movement in and out of Nairobi and Mombasa.