Government gets $1.5B loan from China to extend railway

December 6, 2015 12:37 PM

The Chinese-financed project is the first stage in a scheme that aims to extend to Uganda and other land-locked countries. The goal is to cut the cost of transport and boost trade, by replacing a slower, narrow-gauge line.

Workers are seen near a sign written in Chinese at the construction site of the Mombasa-Nairobi standard gauge railway (SGR) at Emali in Kenya October 10, 2015. Picture taken October 10, 2015. REUTERS/Noor Khamis

Kenya has secured a $1.5 billion loan from China to extend its railway from the capital to the Rift Valley town of Naivasha, a spokesman for the Kenyan presidency said on Sunday.

The faster railway being built from the Indian Ocean port of Mombasa is expected to reach Nairobi next year and open up to commercial services in mid-2017.

Spokesman Manoah Esipisu said the extension to Naivasha will offer access to an industrial park to be built there to accommodate manufacturing firms wishing to use power from the nearby geothermal steam fields that are being developed.

"Kenya and China signed a financing package for the extension. China Eximbank will provide a $1.5 billion loan, 85 percent of the financing, while Kenya will provide the balance," he told a news conference.

The deal was signed on the sidelines of the Forum for China-Africa Co-operation, which was held in Johannesburg.

Kenya Railways and China Communications Construction Company Ltd have also signed a deal to carry out feasibility studies and initial designs for the second leg of the Mombasa-Nairobi line, which will stretch to Malaba on Kenya's border with Uganda.

"The Standard Gauge Railway remains the single largest investment in Kenya’s economy in the last five decades," Esipisu said.

Kenya has also signed or is close to concluding various deals with China for the expansion of the electricity grid, he said.