Kenya has raised the estimated cost of extending its standard gauge railway (SGR) from Naivasha to Kisumu and onward to the Ugandan border to KES651bn ($5bn), an increase of nearly 30% from an earlier government projection, as questions persist over financing and construction progress.
The revised figure represents an increase of KES148.1bn, or 29.4%, from the KES502.9bn estimate published a year earlier for phases 2B and 2C, according to an October 2026 National Treasury report cited by Business Daily on October 22.
Of the revised total, KES618.8bn ($4.8bn), or approximately 95%, is expected to come from external financing. However, the government has not identified confirmed commitments covering the full requirement or explained how its proposed financing instruments will be combined.
Conflicting cost estimates and route specifications
The latest estimate also differs from a KES700bn construction contract reportedly awarded to China Communications Construction Company (CCCC) and its subsidiary China Road and Bridge Corporation (CRBC), according to a July 9 report by Kenya’s Government Advertising Agency.
The reported contract value exceeds the Treasury’s revised estimate by KES49bn, or approximately 7.5%. Authorities have not explained whether the figures reflect different project scopes, contractual terms or valuation methods.
The cost revision follows a review of the railway’s alignment, although the Treasury has not provided a breakdown showing how much of the increase reflects route changes, land acquisition, construction costs or other factors.
The extension is intended to connect Kenya’s existing SGR network at Naivasha to Kisumu and Malaba on the border with Uganda.
The Treasury describes the combined project as a 369-kilometre extension. However, Transport Ministry descriptions put the Naivasha-Kisumu section at approximately 264 kilometres and Kisumu-Malaba at 107 kilometres, totalling 371 kilometres before a separate 8.69-kilometre branch to the proposed Kisumu Port.
Earlier government documents put the Naivasha-Kisumu section at 262 kilometres, which would reconcile with the Treasury’s 369-kilometre figure. The government has not clarified which alignment or measurement underpins the latest cost estimate.
Construction progress and land acquisition
President William Ruto launched the Naivasha–Kisumu section on March 19, and he and Ugandan President Yoweri Museveni launched the Kisumu–Malaba section on March 21. Kenya Railways Corporation reported that the contractor had laid its first rails and sleepers on July 1–2.
Kenya Railways managing director Philip Mainga subsequently said on October 8 that excavation and other construction activities were under way in Narok and additional sections of the corridor.
However, Business Daily reported that main civil works from Naivasha had yet to begin because of outstanding land acquisition. The accounts may refer to different sections or stages of construction, but the extent of sustained mainline works remains unclear.
The National Land Commission has identified more than 5,000 acres for acquisition along the proposed railway corridor, with compensation arrangements being prepared for affected landowners. Identification of the land does not establish that acquisition and compensation have been completed. The government has set aside KES25bn ($192mn) to compensate landowners along the Naivasha–Kisumu section, but has not disclosed a payment timetable, and residents of Nyamira, Bomet and Kericho counties have protested against contractors entering their land before compensation was paid.
The Treasury said environmental and social impact assessments and resettlement action plans had been completed, while the route alignment and land-use requirements had undergone further review.
Financing plans and private-sector participation
The government is pursuing revenue securitisation as part of its financing strategy, proposing to borrow against future collections from the Railway Development Levy (RDL), charged at 2% of the customs value of imported goods.
Kenya has previously proposed raising up to KES390bn through bonds backed by the levy, equivalent to approximately 60% of the revised project estimate. The proposal has not been confirmed as fully financed.
The levy generates about KES50bn ($387mn) a year, and Transport Cabinet Secretary Davis Chirchir said in January that the government was considering securitising part of it to raise up to $4bn for rail expansion.
The relationship between the proposed bond issuance and the Treasury’s KES618.8bn external-financing requirement remains unclear. The classification of borrowing as external or domestic depends on the financing arrangements and investors, rather than solely on the use of domestic levy revenue as security.
Treasury Cabinet Secretary John Mbadi said in February that the government was seeking China Export-Import Bank’s agreement to release levy revenues already pledged under earlier SGR loans. It has not been established whether that restriction has been resolved.
Kenya still carries substantial liabilities from the original Mombasa–Naivasha line. In October 2025, it converted about $3.5bn of China Exim Bank railway loans from dollars into yuan, which the Treasury said would save about $215mn a year. The auditor-general found in July 2025 that Kenya Railways had incurred KES34.1bn in avoidable interest and penalties on the loans, with about KES646bn outstanding.
Roads and Transport Cabinet Secretary Davis Chirchir has separately outlined a proposed arrangement under which the government would finance railway infrastructure while private investors supplied locomotives, freight wagons and passenger coaches.
The investors would recover their expenditure through passenger and freight revenues while paying the government for access to railway infrastructure. However, the proposed operating arrangement remains distinct from the reported construction contract, and its concession terms and financing commitments have not been confirmed.
The National Treasury’s 2026/27 budget includes KES20.84bn for development of SGR phases 2B and 2C, equivalent to approximately 3.2% of the revised project estimate. The allocation covers the current financial year and does not establish the project’s total committed financing or remaining funding gap.
The extension is intended to improve freight connections between the Port of Mombasa, western Kenya and Uganda. However, the increased cost estimate, unreconciled contract value, unresolved financing arrangements and uncertainty over the pace of construction remain significant execution risks.
The extension’s value also depends on Uganda’s planned €2.7bn Malaba–Kampala SGR, being built by Turkey’s Yapı Merkezi. Uganda has secured €650.75mn from the Islamic Development Bank and is seeking a further €150mn from the OPEC Fund, with financial close now targeted for January 2027.
See IntelliNews: Kenya earmarks $192mn for SGR land compensation amid acquisition disputes
See IntelliNews: Kenya in talks with Turkey’s Yapi Merkezi over SGR electrification, regional rail expansion
See IntelliNews: Kenya converts $3.5bn China Exim railway loans into yuan, saving $215mn annually
See IntelliNews: Kenya’s Ruto announces Voi-Tanzania rail link; questions remain over SGR, metre-gauge funding
See IntelliNews: Uganda seeks €150mn OPEC Fund loan for SGR railway