Kenya Lawmakers Want Rail Levy to Help Pay China-Run Trains

(Bloomberg) --

Kenya is set to start funding operations of a Chinese-backed railway using proceeds from a levy which was initially meant to finance land purchases for the project.

Lawmakers on Wednesday approved the plan to expand the use of the money, seen topping 28 billion shillings ($261 million) by June, to include operations and maintenance of the railway. That’s partly because an extension of the railroad was put on hold, halting new land acquisitions.

President Uhuru Kenyatta has to approve the amendment of the Railway Development Levy of as much as 2% on imports before it becomes law.

The railway, funded, built and operated by Chinese agencies, started running between Kenya’s port city of Mombasa to the capital, Nairobi, in 2017. It has accrued an operational bill of 37 billion shillings that the government is yet to pay, according to David Pkosing, chairman of the National Assembly’s transport committee.

Kenya shouldn’t “have the railway development levy accumulating while government is accruing debts as operational costs,” Pkosing said by phone.

Revenue from passenger operations was 1.28 billion shillings and freight generated 7.54 billion shillings in the nine months through September 2019, according to Kenya Railways Corp. data.

The government is looking to reduce how much it spends on debt to free up funds to deal with the coronavirus pandemic that it sees cutting economic growth to as low as 1% this year. The National Treasury on April 16 proposed to cut principal loan repayments to the Export-Import Bank of China.

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