A damning internal audit pulls the curtain back on Kenya Railways, revealing a chaotic web of forex losses, unverified payments, and completed lines that are still bleeding cash.

How do you spend billions on a railway line that is already finished? That is the question haunting Kenya Railways after an explosive audit flagged massive financial irregularities. From "dollar deals" that bypassed PFM laws to mysterious maintenance costs for the Nairobi-Naivasha line, the Standard Gauge Railway (SGR) continues to be a voracious consumer of public funds.

The SGR was sold as an economic savior; the books suggest it is a financial black hole. With a Sh50 billion loss and penalties for loan defaults racking up, the audit confirms the worst fears of critics: the railway is not just expensive to build, it is ruinously expensive to run, and the governance rot runs deep.

The "Dollar Deal" Scandal

The audit report, which is currently under review by Parliament, highlights a disturbing trend of payments made in US dollars to the SGR operator, Afristar. These transactions, often executed without proper hedging or authorization, have exposed the corporation to massive forex losses as the Kenyan Shilling fluctuates.

More critically, the audit points to breaches in the Public Finance Management (PFM) Act. The use of foreign currency for local operations is strictly regulated, yet Kenya Railways appears to have operated as if it were exempt. [...](asc_slot://start-slot-27)These "dollar deals" suggest a level of opacity that benefits foreign contractors at the expense of the Kenyan taxpayer.

• Key Finding: Payments to Afristar in USD causing forex losses.
• Unexplained Cost: Sh64 billion spent on Nairobi-Naivasha line after completion.
• Penalty: Sh3.5 billion fine for defaulting on China Exim Bank loans.
• Total Loss: Sh50 billion posted by Kenya Railways.

Ghost Maintenance?

Perhaps the most shocking revelation is the expenditure on the Nairobi-Naivasha line. [...](asc_slot://start-slot-29)The audit found that roughly Ksh 64 billion was spent between 2021 and 2023 on "construction" of the line, despite it being completed in December 2019. Where did this money go?

Management has struggled to explain these costs, labeling them vaguely as "development" or "pending bills." However, the sheer scale of the expenditure—more than the budget of some ministries—raises red flags about potential embezzlement or gross mismanagement. It suggests that the SGR project accounts are being used as a slush fund.

The Debt Trap Tightens

To add insult to injury, Kenya Railways has been slapped with a Ksh 3.5 billion penalty for failing to service its loans to the China Exim Bank. [...](asc_slot://start-slot-31)The corporation argues that the revenue generated from operations is insufficient to meet these obligations. This is a tacit admission that the SGR is not self-sustaining.

As the debt burden grows, the taxpayer is left holding the bag. The dream of a modern, profitable railway is fading, replaced by the nightmare of endless subsidies and shadowy accounting.

"The penalties represent an avoidable charge to public funds," Auditor General Nancy Gathungu noted, a polite bureaucratic way of saying that billions are being burned while the trains keep running empty.