Kenya's Treasury wants SGR escrow clause in China Eximbank loan renegotiated; KES 44.6bn sits at KCB

Treasury Cabinet Secretary John Mbadi says a clause in Kenya's 2014 standard gauge railway (SGR) loan agreement with China's Eximbank has left KES 44.6 billion collected from passenger fares and freight charges sitting idle in accounts at KCB Bank, and the Treasury wants the clause renegotiated, Business Daily reported on 12 October 2026.

Kenya and Eximbank signed the loan deal in 2014. It requires revenue from SGR operations to be paid into a joint account at KCB, the newspaper said. Cash in the frozen KCB accounts stood at US$344 million (about KES 44.63 billion), according to its report.

Mbadi made the remarks in a telephone interview on 9 October, according to Business Daily. He said the agreement required that some money be paid into an escrow account as security, which he called “completely wrong in the first place”.

Because the money cannot be used to repay the loans, the State has to use taxes to pay tens of billions of shillings a year to Eximbank, Business Daily reported Mbadi as saying.

Mbadi also said the escrow account has not impaired repayment of the loan. “The SGR loan is paid like any other sovereign loan,” he said, as quoted by Business Daily. He declined to say whether Nairobi has approached Beijing to renegotiate the escrow terms.

The Treasury has made the same complaint before. Business Daily reported on 5 December 2025 that the Treasury said the arrangement “has effectively locked out loan repayments, resulting in the steady accumulation of arrears”. Under the terms, Kenya Railways Corporation must keep a minimum balance of KES 25 billion in the special account before any surplus can go to loan servicing, the paper reported then.

In the same December 2025 report, Business Daily quoted the Treasury as saying SGR loan arrears had grown to KES 413.36 billion by the end of June 2025. The Treasury recommended that the escrow account terms “should be renegotiated to allow for debt service”. The paper said Kenya borrowed US$5.08 billion from the China Export-Import Bank for two phases of the SGR.

In its 12 October report, Business Daily said Kenya Railways' outstanding loan balance was unchanged at KES 547.378 billion at the end of June 2026. That is 53 per cent of the government's KES 1.145 trillion on-lent loan portfolio, the paper said.

A separate 2025 agreement with Beijing converted three dollar-denominated SGR loans into Chinese yuan, extended their maturities and added grace periods, according to the paper. Mbadi said at the time, as quoted by Business Daily on 18 December 2025, that the loans would be paid over 11 years with a four-year grace period, a total of 15 years. The paper reported that the loans, first due to be repaid by 2035, now run to 2040.

Mbadi said the currency conversion saves the government about US$215 million (about KES 27.9 billion) a year, as quoted by Business Daily.