Kenya Raises Passenger Fares on Chinese-Built Railway Amid Debt Struggles and Fuel Price Hikes
In a bid to address mounting financial challenges stemming from loan repayments and surging fuel prices, Kenya has announced a significant increase in passenger fares on the Chinese-built Standard Gauge Railway (SGR).
The state-owned Kenya Railways disclosed that the 470-kilometer journey between Mombasa, the country’s port city, and the capital, Nairobi, will witness fare hikes effective from January 1st, 2024.
The fare adjustments, which have sparked significant public attention and debate, will impact travelers in both first-class and economy class cabins. First-class fares will increase from $19 to $30, while economy class tickets will rise from $6 to $10.
Kenya Railways attributed the fare hike to the global surge in fuel prices. In their statement, they explained, “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.”
This announcement comes in the wake of concerns about Kenya’s financial stability, particularly in relation to its debts, with the central bank governor, Kamau Thugge, recently noting that the Kenyan shilling has been overvalued by 25% for years, causing the country to maintain an artificially strong exchange rate.
Kenya’s President, William Ruto, recently traveled to China in a quest to secure a $1 billion loan to complete stalled infrastructure projects. This move raised eyebrows as Kenya’s overall debt has reached a record $70 billion.
The fare adjustments will not only affect the popular passenger service between Mombasa and Nairobi but will also impact the commuter rail service in the capital, Nairobi, as well as the Kisumu and Nanyuki safari trains, which draw thousands of tourists annually.
The Standard Gauge Railway, constructed at a cost of $4.7 billion, financed by loans from Chinese banks, commenced operations in 2017. However, it has grappled with low uptake of its cargo services.
Economist Aly-Khan Satchu emphasized the need for cross-border expansion of the SGR, stating, “The Kenya SGR desperately needs cross-border expansion to make it a financially sustainable project. The SGR, as is, is a dud. To make it sustainable, it needs to connect Uganda’s oil to the sea and (Congo) minerals.”
Kenya’s growing public debt has compelled President Ruto to announce austerity measures, including restrictions on foreign trips and a more than 10% cut to all government ministry budgets.
However, the President has faced criticism from Kenyans due to his own frequent foreign travels, having undertaken 38 trips since his inauguration in September 2022, surpassing his four predecessors in their first year in office.
This story has been adopted from AfricaNews.
