NAIVASHA, Kenya — Kenya is set to restart construction of its long-delayed Standard Gauge Railway (SGR) extension on Thursday, marking a major shift in infrastructure financing after years of stalled progress linked to reduced Chinese lending.
The multi-billion-dollar project, which will extend the railway beyond Naivasha toward the Ugandan border, had been on hold for more than six years after initial funding from China slowed under the Belt and Road Initiative.
The first phase of the SGR, connecting Mombasa to Nairobi, was completed in 2017, but expansion plans stalled roughly 350 kilometres short of the Ugandan border, delaying a key regional transport corridor intended to boost trade and integration within East Africa.
The project had also drawn criticism from some quarters, with detractors citing it as an example of so-called “debt trap diplomacy” claims consistently rejected by Beijing.
In response to mounting debt concerns, Kenya and China renegotiated loan terms last year to ease annual repayment obligations.
The revival of the extension is now being driven by a new financing model centred on revenue securitisation.
The government amended legislation to allow proceeds from the Railway Development Levy, charged on cargo transported via the SGR, to be used as seed capital for further construction.
The levy is estimated to generate about Sh35 billion annually, providing a domestic funding base at a time when Kenya faces tight fiscal constraints and limited borrowing space.
State corporation Kenya Railways did not disclose the total cost of the extension or full details of the financing structure.
However, it confirmed continued Chinese involvement, with China Road and Bridge Corporation set to undertake construction works.
Analysts say the new approach reflects a broader recalibration of China-Africa infrastructure partnerships following a 2024 Beijing summit, where leaders agreed to prioritise investment-led models over debt-heavy financing.
“Following the heavy propaganda in regard to the debt burden, particularly from the West, China and Africa discussed a new model based on investments to sustain the level of building infrastructure,” said Peter Kagwanja.
China had significantly reduced lending to Africa from 2019, citing rising debt sustainability concerns after years of heavy financing for large-scale infrastructure projects across the continent.
At the 2024 summit, Beijing pledged $50 billion in combined credit and investments over three years, signalling a shift in strategy.
Kenya has already tapped into this model, including a $1.5 billion highway expansion project involving Chinese firms.
For Nairobi, the securitisation model offers a workaround to fiscal pressure.
The government of William Ruto has increasingly relied on leveraging existing revenue streams to fund development, as debt servicing consumes a significant share of national revenue.
Efforts to raise taxes have faced public resistance, culminating in widespread protests in 2024, further constraining the government’s fiscal options.
The relaunch ceremony is expected to take place near Naivasha, signalling renewed momentum for a project seen as critical to regional trade, logistics efficiency, and Kenya’s long-term economic growth strategy.
