China has slapped Kenya with a whooping 1.3 Billion fine after the government failed to pay back the loans advanced by Chinese banks for the construction of the standard gauge railway (SGR).

The East Asian giant took the steps after the National Treasury  did not remit payments for the financial year ended June. The fine will be 1% of the defaulted amount, showing that the government is supposed to be paying about 130 billion annually.  Details about the loan and the repayment plans have always been shrouded in secrecy.

This comes even as the SGR has failed to break even for 4 consecutive years, revenue collected from the passenger and cargo services are very little as compared to the amount required. This means  that most of the monies used to repay the loan are sourced from taxpayers.

For instance in the year ending June, the SGR collected 15 billion from their services while operation costs stood at 18.5 Billion. This points to the economic unviability of the project which economists have termed to be a white elephant project.

Things are expected to get tough for the state corporation after President William Ruto honored his campaign promise to the coast region by returning port activities back to Mombasa. President William Ruto last month reversed one of the most controversial policies of the previous administration that had made it compulsory for cargo clearance to be done at the inland container depots in Nairobi and Naivasha.

“This evening I will be issuing instructions for clearance of goods to revert to the port of Mombasa as I made the commitment. This will restore thousands of jobs to the people of Mombasa,” said Ruto after taking the oath of office on Tuesday, September 13.

The return of cargo clearing services to Mombasa will be a big blow to SGR as cargo transporters had been forced to use the rail for transport. This means that as cargo will be cleared in Mombasa, traders will have to choose their preferred means to transport their cargo. Subsequently the traffic on the SGR will be lower, this will lead to low revenues for the already struggling corporation.