Kenya Railways faces a Sh3.5 billion penalty for defaulting on loans taken for the Standard Gauge Railway (SGR) construction. According to Auditor General Nancy Gathungu’s report to Parliament, the penalties stem from unpaid obligations to China Exim Bank.
The audit reveals that as of June 30, 2024, Kenya Railways had not made any repayments to the bank, accumulating Sh41 billion in loan repayments and penalties. Gathungu criticized the corporation’s failure to settle maturing obligations, questioning the adequacy of financial controls. The penalties, deemed preventable, highlight the corporation’s financial mismanagement and burden taxpayers with avoidable costs.
The Auditor General noted Kenya Railways’ explanation that revenue generated was insufficient to cover loan obligations, pointing to deeper financial troubles. Treasury records showed a Sh50 billion loss for Kenya Railways, the highest among state corporations.
The report also flags Sh27 billion in potential liabilities from pending court cases, including Sh15 billion for illegal property demolitions. Procurement irregularities worth Sh9 billion were uncovered, with unjustified direct or restricted tendering methods used instead of open tenders. In some cases, goods worth Sh2 billion were delivered without inspection.
Auditors highlighted further breaches, such as signing contracts after executing tenders and potential revenue losses from meter gauge railway operations. The findings underscore Kenya Railways’ financial and operational mismanagement, raising concerns over public funds and the corporation’s sustainability.
