China Eximbank pledges $3.7 billion loan for Kisumu-Malaba Section of Standard Gauge Railway Project (Linked to Record ID#37103, #31777, and #47025)

Project narrative

In December 2016, China Eximbank reportedly expressed interest in financing the third section of Kenya's Standard Gauge Railway (SGR), from Kisumu to Malaba. In March 2016, Kenya signed an agreement with China Communications Construction Company (CCCC) for the extension of the railway from Kisumu to Malaba, although this contract did not include financing of the railway section. Then, in April 2019, President Kenyatta traveled to Beijing to request a China Eximbank loan worth approximately US$3.7 billion for the Kisumu to Malaba section of the Standard Gauge Railway. His request was rejected. The Chinese Ambassador to Kenya was later asked about the Kenyan President’s expectations that he would secure a new loan commitment from China Eximbank for the SGR and he reportedly said that “I really don’t know where those expectations came from. There are several potential reasons why this loan agreement was not approved, including several active corruption investigations related to other sections of the SGR and escalating concerns about the government's loan repayment capacity. In 2018, the SGR project became a target of an anti-corruption drive by Kenya's Department of Public Prosecutions (DPP). According to Reuters, the “Kenyan authorities … arrested the head of the agency that manages public land and the boss of the state railway on suspicion of corruption over land allocation for the new $3-billion flagship Nairobi-Mombasa railway. … Mohammed Abdalla Swazuri, the chairman of National Land Commission, was one of 18 officials, businesspeople, and companies named in a statement listing arrests that was posted …on the prosecutor’s office’s Twitter feed. Also arrested was Atanas Kariuki Maina, managing director of the Kenya Railways Corporation. …The investigation that led to the arrests centers on allegations that officials siphoned taxpayer money through [fraudulent] compensation claims for land used for the railway.” In late 2018, the International Monetary Fund (IMF) officially revised its evaluation of Kenya’s financial risk profile, raising Kenya’s risk of default on debt repayment from “low” to “moderate.” As of 2019, Kenya’s public-debt-to-GDP ratio stood at 60%, which the IMF considers to be a dangerous level that can impinge upon a country's economic growth prospects.