Depreciating Shilling Costs Kenya Ksh14 Billion More in SGR Loan Repayment

The World Bank has projected Kenya will cough up Ksh14 billion more to service the Standard Gauge Railway (SGR) as the depreciating Shilling struggles to trade against the Dollar.

In last year January, Kenya paid Ksh70.2 billion. However, with the Shilling exchanging at Ksh157.74 against the Dollar, according to the Central Bank of Kenya (CBK), President William Ruto’s government will pay up to Ksh84.7 billion this month.

The shilling, at the start of last year, traded at Ksh123.55 against the dollar and has suffered a decline of 27.36 per cent over the twelve months. 

With Kenya’s economy struggling to stay afloat despite recent fiscal policies implemented by the government, paying up more money to service credit may pile pressure on foreign exchange reserves. 

Kenya borrowed a total of $5.08 billion (KSh 801.1 billion) between 2014 and 2015 to finance the construction of the SGR from Mombasa to Naivasha from China.

However, it started servicing the debt in 2020 and is expected to run till 2040, with a grace period of up to seven years.

Two years later, data from the National Treasury indicates that the debt repayment increased by about half to Ksh 107.42 billion in the fiscal year 2022/23.

This was a 46.19% increase from Ksh73.48 billion in repayment reported during the previous financial year 2021/2022.

On November 7, 2023, the Cabinet Secretary for Transport Kipchumba Murokem disclosed that the loan is also subjected to a two per cent interest rate, causing it to balloon year after year.

Revealing the details that were closely pegged by the previous regime in which the loan was borrowed, Murkomen also revealed that the management and commitment fee of the loan was also tied to a 0.25 per cent yearly fee.

Part of the contract also demands Kenya to first approach China to purchase any goods from the proceeds of SGR before touring other markets. 


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