China Exim Bank cuts $322 million standard gauge railway funds

The financier of the standard gauge railway (SGR), China Exim Bank, has cut funding to ongoing work on the second phase of the railroad by a whopping Sh32 billion, citing the barrage of court cases against the project.

Supplementary budget documents tabled in Parliament last week show that allocations to the SGR project dropped by Sh42 billion, including the Sh32 billion held back by the lender.

The remaining Sh10 billion was counterpart financing from the railway development levy fund that has now been reallocated to pay contractors who built the Mombasa-Nairobi section of the project and settle the management fees payable to the Chinese operator of the rail line.

“The State department had projects such as Nairobi-Naivasha SGR allocation reduced by Sh42 billion of which Sh32 billion was from a donor because of court cases, while Sh10 billion railway development levy fund was re-allocated to Mombasa-Nairobi SGR project,” the supplementary budget II says.

MPs responded to the decision with a statement saying “the reduction in funding for the project could result in delayed completion and increase in interest and other claims on delayed payments and increased costs of projects than originally planned.”

Phase II of the SGR project, covering the Nairobi-Naivasha section of the line, has faced multiple challenges since work on it began in the last quarter of 2017, including a court case filed by environmentalists opposed to the line’s passage through the Nairobi National Park.

Last September, the National Environment Tribunal temporarily stopped construction of the section until a dispute challenging it is determined.

The 120-kilometre Nairobi-Naivasha line, which cuts through the Nairobi National Park, town centres and agricultural zones like Maai Mahiu will cost the taxpayer Sh150 billion.

It connects to the recently completed Mombasa-Nairobi segment and is ultimately expected to connect Nairobi to Kampala via Naivasha, Kisumu and Malaba. The contractor, China Road and Bridge Corporation (CRBC), moved to site last October and has been working since despite numerous challenges.

Last September, lack of a land compensation plan delayed works on the project up to four months after Kenya secured funding from the Chinese.

Works on the project were once again suspended for about one week in January as workers protested low pay and harsh working conditions.

Delay in completing the section could also affect construction of the segment to Malaba, where it will connect with the Ugandan section.

The Kenyan SGR project is in competition with Tanzania’s Dar es Salaam line that also seeks to connect landlocked Uganda and Rwanda respectively.

Tanzania has already grabbed an oil pipeline that was to run from Uganda through Kenya to the coast and Nairobi is keen on ensuring a repeat of the same does not happen.

Kenya Railways, the project owner, did not respond to our queries on the subject.

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