Kenya Railways is under scrutiny after defaulting on loans, leading to Sh3.5 billion in penalties. Financial mismanagement and procurement issues continue to raise concerns about accountability and stability. This was reported by the railway transport news portal Railway Supply.

Kenya Railways
Photo: Kenya Railways

Kenya Railways Faces Hefty Penalties for Loan Defaults

Kenya Railways faces serious financial troubles after defaulting on loans for the Standard Gauge Railway (SGR). The penalties, totaling Sh3.5 billion, highlight deeper challenges in financial planning and operations.

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The audit revealed Kenya Railways failed to make scheduled payments to China Exim Bank, causing debts and fines to increase. Outstanding obligations reached Sh41 billion, creating additional burdens for the state corporation.

Auditor General Nancy Gathungu criticized Kenya Railways for failing to justify these defaults. She emphasized poor financial controls and called for immediate measures to prevent further losses and penalties.

Procurement Irregularities Add Pressure to Kenya Railways

Kenya Railways also faces accusations of irregular procurement practices during the audit period. Over Sh9 billion in supplies were acquired without competitive bidding, raising transparency concerns.

Auditors discovered contracts worth Sh2 billion lacked inspection before delivery, exposing weaknesses in oversight. Violations included executing agreements for services before formal contracts were finalized.

Kenya Railways’ financial difficulties worsened as revenue leakages were identified in meter-gauge railway services. These findings emphasize the need for reforms to improve transparency and efficiency.

Kenya Railways reported losses of Sh50 billion, the highest among state corporations in the review period. Without intervention, critics warn the corporation may face further financial instability and legal challenges.

In addition, Kenya Railways faces potential liabilities of Sh27 billion, including Sh15 billion in court-awarded damages for property demolitions. This adds further strain to its already fragile financial position.

Auditor General Gathungu stressed that penalties and losses could have been avoided with better controls. She urged authorities to strengthen accountability measures and enforce compliance with procurement laws.

The audit underscored systemic flaws that need urgent correction to restore financial health. Observers argue Kenya Railways must prioritize improving oversight, revenue collection, and cost management to avoid deeper crises.

Reforming procurement processes is also critical, as poor practices threaten public confidence and operational efficiency. Transparent tendering and contract execution could reduce losses and improve compliance standards.

Kenya Railways’ financial crisis highlights broader issues within state corporations. Stakeholders stress that immediate reforms and stronger governance are essential to ensure stability and sustainable operations.

With mounting debts and penalties, Kenya Railways must act swiftly to address financial mismanagement. The corporation’s ability to recover depends on enforcing accountability and prioritizing transparency in operations.

Observers warn that delays in reforms could lead to further losses, higher public debt, and increased legal disputes. Stronger oversight mechanisms and better financial planning are essential for Kenya Railways’ recovery.

Auditor General Gathungu concluded that timely interventions are necessary to prevent future losses. Kenya Railways must adopt more efficient practices and address procurement gaps to protect public funds and restore confidence.

Source: eastleighvoice.co.ke

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