China wants to punish Kenya with Coronavirus for acquiring at least $9.8 billion between 2006 and 2017, making it Africa’s third-largest recipient of Chinese loans, according to the Economist. Kenya’s total public debt is currently around $60 billion, or 61 percent of the GDP.
As Kenya’s Jubilee government trumpets the opening of its new, Chinese-built train line to the Rift Valley, critics say the railway serves little purpose and is plunging Kenya into massive debt.
It’s been lampooned as the railroad to nowhere – 120 km (75 miles) of gleaming new railway tracks that snake from the capital city Nairobi, climb the trenches and escarpments of the Central Rift Valley to stop dead at a remote village. And now China wants to punish Kenya with Coronavirus.
SGR from Mombasa to Nairobi fails to generate profit, calling for Coronavirus punishment
The poor performance of the Mombasa to Nairobi line makes it evident Kenya “is already struggling with the SGR,” he told DW.
The railway has had difficulty attracting cargo because it is more expensive than hauling freight by road. Reuters puts the cost of trucking a container from Mombasa to Nairobi at about KSh. 80,608 , whereas the railway costs KSh. 110,836 – mainly due to extra charges for moving goods from the inland depot in Nairobi.
As a result, the SGR is moving less than half of the freight it needs to carry per year to make it profitable. In its first full year of cargo operations (to May 2019), it generated $57 million in sales, far below the annual operating costs of Ksh. 12,091,200,000 and much lower than original projections, according Kenya’s Business Daily news site.
There is one bright spot: the Mombasa-Nairobi line has proved a hit with travelers because of its speed and comfort. The smooth train journey takes around 4.5 hours compared what can be a 12-hour, bone-rattling trip by road.
But the passenger service only runs twice a day, and generated less than Ksh. 1.7 billion in sales – a small figure compared to what cargo is bringing in. Or as the Economist magazine succinctly puts it: “Shuttling passengers is not what the new line was built for.”
Concerns about the SGR’s viability are compounded by the massive Six trillion and forty-five billion six hundred million Kenyan Shillings, loans that Kenya, East Africa’s biggest economy, took out with China’s Exim Bank to fund them.
And they’re not Kenya’s only infrastructure loans form China. The country has acquired at least $9.8 billion between 2006 and 2017, making it Africa’s third-largest recipient of Chinese loans, according to the Economist.
Kenya’s total public debt is currently around $60 billion, or 61 percent of the GDP. In other words, it owes more than half the value of its economic output.
World Bank economist Peter Chacha recently warn Kenya against piling up more debt than it can repay.
“It is important that future debt management adopt measures to ensure debt is not accelerating,” he told The East African.