Tuesday, 28 September, 2021

Chinese firm demands billions of shillings from Kenya before handing over railway project

  • Sun Online Desk
  • 12th August, 2021 04:32:10 PM
  • Print news


A Chinese firm demanded billions of shillings in pending bills that Kenya borrowed to build the modern railway line from Mombasa to Nairobi. Bonface Otieno, writing in Business Daily said that the Africa Star Railway Operation Company Ltd (Afristar), the Chinese company contracted to run the train service, has listed clearing of its debts as a condition before fully transferring operations of standard gauge railway (SGR) to Kenya in May next year.

Parliament last year revealed that Kenya had not paid Sh 38 billion to Afristar, which is majority-owned by China Road and Bridge Corporation (CRBC) and was contracted in May 2017 to run the passenger and cargo trains on the SGR.

"The negotiations between KRC and Afristar commenced in the year 2019 and an agreement has been reached that KRC (Kenya Railways Corporation) takes over obviously with some conditions including clearing of any outstanding payments," KRC chairman Omudho Awitta told the Business Daily. The billions of shillings in pending bills add to the Sh 420 billion that Kenya borrowed to build the modern line from Mombasa to Nairobi and for the purchase of engines and coaches.

The line, which started operations in 2017, was then linked with another new track, costing USD 1.5 billion (Sh 162.9 billion) and also funded by Chinese loans, to Naivasha, reported Business Daily.

Afristar has been managing the ticketing system, landing and offloading of cargo and collection of passenger fares, including non-cash revenues like M-Pesa, under the 2017 agreement.

Ahead of May, Kenya will need to settle the billions of shillings in unpaid bills or

restructure the liability into a debt that will be repaid over a longer period, said Otieno.

The pressure to settle the Afristar dues comes when the Covid-19 pandemic has

hit Kenya's government revenues and limited access to commercial loan markets,

forcing the country to turn to the World Bank and the International Monetary Fund (IMF) for direct budgetary financing.

Apart from the operating fees, Kenya is obligated to honour repayment of the Sh 324 billion it borrowed for the project from the Exim Bank of China in May 2014 and started repaying last year after the expiry of the five-year grace period.

Source: ANI