Kenya defaulted on payments to China for the SGR loan in the financial year ended June 2022. This default saw Kenya get fined Sh. 1.312 billion by Chinese banks.
“This (Sh. 1.312 billion) relates to the cost of default on interest at one percent of the due amount,” a disclosure document published by a local daily cites.
The SGR project is currently unable to sustain itself without tapping into public coffers. During the year to June, SGR posted an operation loss of Sh. 3.4 billion, and wired Sh. 22.7 billion in loan repayments to China.
Operation costs stood at Sh. 18.5 billion in the year to June against sales of Sh. 15 billion. In the six months to June this year, SGR recorded a total of Sh. 7.6 billion in revenues, out of which Sh. 6.2 billion (translating to 84 per cent), was cargo revenues.
Repayment of the SGR loan started in January 2020 after the end of a five year grace period that China had given Kenya.
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Currently, China, Kenya’s biggest foreign creditor after the World Bank. Kenya spent a total of Sh. 117.7 billion on Chinese debt in the period to June 2022, of which about Sh. 24.7 billion is in interest payments and almost Sh. 93 billion in redemptions.
The SGR operates express passenger trains from Nairobi to Mombasa and an intercounty service with stops in Athi River, Emali, Kibwezi, Mtito Andei, Voi, Miasenyi, and Mariakani stations.
Kenya last year 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 Beijing lenders. The moratorium started in January 2021.
China postponed the repayments in January, helping Kenya temporarily retain Sh. 27 billion, which was due for six months ending June 30.
But opposition from Chinese lenders forced Nairobi to drop its push for an extension of the debt repayment holiday to avoid straining relations with Kenya’s biggest bilateral creditor.
Kenya earlier wired Sh. 29.86 billion to China in the quarter to September 2021 to ease a standoff over debt repayments that delayed disbursements to projects funded by Chinese loans.
The Nairobi-Mombasa SGR line was built with a Sh. 450 billion Chinese loan, whose terms have never been made public.
Kenya Railway Corporation in December 2021 gazetted promotional tariffs to ferry cargo from the Mombasa port to Malaba at $860 (Sh. 103,539.02) for a 20-foot container weighing up to 30 tonnes, and $960 (Sh. 115,578.44) for a container weighing above 30 tonnes.
Charges for a 40-foot container weighing up to 30 tonnes stood at $1,110 (Sh. 133,636.12) while those above 30 tonnes were levied $1,260 (Sh. 151,695.05).
