Kenya hikes fares on Chinese-built railway to tackle mounting debt

Kenya announced Wednesday a sharp increase in passenger fares on the Chinese-built Standard Gauge Railway as the country struggles with repaying loans owed to Beijing and others along with higher fuel prices.

State-owned Kenya Railways said in a statement that the 290-mile journey between the port city of Mombasa and the capital, Nairobi, will cost around $30 in first class, up from $19, and $10 in economy, up from $6.

Kenya Railways cited the global rise in fuel prices: “This increase is informed by changes in the energy and petroleum sector, where prices of fuel have significantly increased, thus affecting the cost of our operations.”

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Wednesday’s announcement came days after Kenya’s central bank governor, Kamau Thugge, said the Kenyan shilling had for years been overvalued by 25%, which ” led the country to maintain an artificially strong exchange rate.”

Two weeks ago President William Ruto was in China, where he sought a $1 billion loan to finish stalled infrastructure projects despite Kenya’s overall debts at a record $70 billion.

The new train fares come into effect on Jan. 1, 2024.

The changes will also affect the popular commuter rail service in the capital, Nairobi, as well as the Kisumu and Nanyuki safari trains that attract thousands of tourists each year.

The Standard Gauge Railway, or SGR, which cost $4.7 billion borrowed from Chinese banks, started operations in 2017 but has struggled with low uptake of its cargo services.

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“The Kenya SGR desperately needs cross-border expansion to make it a financially sustainable project,” economist Aly-Khan Satchu told the Associated Press.

“The SGR, as is, is a dud. To make it sustainable, it needs to connect Uganda’s oil to the sea, and (Congo) minerals,” Satchu added.

Kenya has been struggling with growing public debt which has led Ruto to announce tough austerity measures including restrictions on foreign trips and cutting all government ministry budgets by more than 10%.

But Ruto has faced criticism from Kenyans over his own foreign travels, with 38 trips since his inauguration in September 2022. That’s more than any of his four predecessors in their first year in office.