THE government of Kenya has signed a contract for the construction of the next section of the Standard Gauge Railway (SGR) project, Phase 2B from Naivasha to Malaba in Uganda.

According to the National Treasury, feasibility studies are now underway for Phase 3. Together phases 2B and 3 are estimated to cost $US 13bn.

An update on the SGR project was included in a prospectus for international investors prepared by the National Treasury ahead of Kenya’s recent return to the Eurobond market.

Earlier this week Kenya sold a new $US 1.5bn Eurobond maturing in 2031. The proceeds will be used to buy back a large proportion of a $US 2bn international bond due in June.

The SGR was originally intended to run from Mombasa to Kisumu, but insufficient funding meant that work on the project came to a halt after the completion of Phase 2A from Nairobi to Naivasha.

The Kenyan government borrowed $US 5bn from the Export-Import Bank of China to fund construction of the SGR from Mombasa to Naivasha, but repaying this debt has placed a strain on the national economy where public debt was 68.4% of GDP in 2022.

To help meet repayments and cover rising fuel costs, in November 2023 Kenya Railways increased fares on the 470km Phase 1 of SGR. The cost of a journey from Mombasa to Nairobi went up from $US 19 to $US 30 in first class and from $US 6 to $US 10 in economy.

Nevertheless, the Kenyan government is now working to revive the next phases of SGR and cabinet secretary for transport, Mr Kipchumba Murkomen, is hopeful that 35% of work will be finished during the course of this year.

Extension of the SGR under Phase 2B from Naivasha has been welcomed by the governor of Kisumu county, Professor Anyang’ Nyong’o. He says that the new railway will significantly boost economic activity and provide faster passenger and freight transport between Mombasa, Kisumu City and Uganda.

It is also expected to assist with the development of tourism in western Kenya and in the region around Lake Victoria.