PUBLISHED ON November 17th, 2014

IMF says high-speed railway to boost Kenya’s GDP

NAIROBI, Nov. 14 (Xinhua) — The construction of Standard Gauge Railway (SGR) should help boost Kenya’s economic growth to 6.9 percent in 2015, the International Monetary Fund (IMF) said on Friday.

The IMF said in a statement that the initiation of the high- speed railway project is a major step for Kenya and for the East Africa region.

“The SGR’s initial construction work will contribute to higher real Gross Domestic Product (GDP) growth, projected to rise to 6.9 percent in 2015 from 5.3 percent in 2014,” the organization said.

China has agreed to fund the first phase of a standard gauge railway line, linking the East African nation’s port city of Mombasa to Uganda, Burundi and South Sudan.

China Exim Bank will fund 90 percent of the 3.6 billion U.S. dollars for the first phase of the project that will cover 485 kilometers from the port of Mombasa to Nairobi.

The Kenyan government will provide the remainder of the funding, the Kenyan president office said in a news release.

The IMF said Kenya’s fiscal monetary policy will aim at preserving debt sustainability while providing room for the execution of the railway project.

“The SGR will boost integration across East Africa by reducing transport costs significantly, bringing down the cost of doing business and improving standards of living for the population, helping Kenya move closer to the medium-term goals outlined in its Vision 2030 plans,” the IMF said.

According to the fund, imports of equipment for the SGR project combined with continued investment in oil exploration are expected to keep the external current account deficit relatively high at around 8.5 percent of GDP in 2015, albeit a slight decline from a projected 9 percent deficit in 2014 thanks to lower international oil prices.

The contractor, China Road and Bridge Corporation, has already said it plans to employ 30,000 locals at the peak of the project while 40 percent of the work would be sub-contracted to the local companies. The construction materials will also be sourced locally.

The SGR is to be constructed in line with the Chinese railway building standards, and its viability is dependent on the assumption that it will be part of a seamless railway system linking Kenya and Uganda, and at the same time serving the landlocked Rwanda and Burundi.

The IMF said the precautionary loan facility it reached with Kenya would accommodate the SGR project and other initiatives launched by the government to remove hurdles to growth, while reducing vulnerabilities and preserving a sustainable debt position.

The SGR is intended to reduce the cost of doing business by reducing the cost of transport, a move that will see Kenya become a competitive business hub for the East African region and beyond.

Passenger trains will have a speed of 120 kilometers per hour while those for freight will be designed to move at 80 kilometers an hour.

Analysts say the realization in East Africa is that a common approach to such a project could win if approached jointly. The region expects to use the rail to meet its transportation needs from the port of Mombasa.


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