World Bank: Kenya Could Have Saved $900m on SGR Construction, Cites Corruption and Inflated Costs

NAIROBI: Kenya could have saved up to US$900 million (approximately KSh116 billion) in the construction of its Standard Gauge Railway (SGR) had the project been implemented at costs comparable to Tanzania’s electrified railway, according to a new World Bank report that raises concerns about procurement irregularities, land speculation and corruption. The findings, contained in the 34th edition of the Kenya Economic Update, released on Wednesday, November 4, show that Kenya’s Mombasa–Nairobi railway was significantly more expensive per kilometre than comparable projects in Tanzania and Ethiopia. The World Bank established that the diesel-powered Mombasa–Nairobi SGR cost US$7.6 million per kilometre, compared with US$5.7 million for Tanzania’s electrified Dar es Salaam–Dodoma railway and US$5.3 million for the electrified Djibouti–Addis Ababa line. Despite using diesel locomotives, Kenya’s railway was approximately 33% more expensive per kilometre than Tanzania’s electrified line and 43% costlier than the Ethiopia–Djibouti railway. “With the same cost metric as the Tanzanian line, Kenya could have saved up to US$900 million in initial construction costs,” the World Bank said. The report attributed at least 30% of the estimated excess costs to governance challenges rather than differences in terrain or engineering requirements. These included the preference for direct contracting over competitive tendering, land speculation and what the Bank described as outright fraud involving land titles, property valuations and compensation payments. The findings reinforce concerns raised by Transparency International Kenya in a separate 2026 assessment, which identified the SGR as particularly vulnerable to corruption using the Infrastructure Corruption Risk Assessment Tool. The World Bank observed that direct procurement and public-private partnership projects originating from unsolicited proposals without sufficient transparency remain common in Kenya. It also highlighted the longstanding practice of awarding government contracts to politically connected companies, including businesses owned by public officials, warning that such arrangements increase the likelihood of collusion and inflated project costs. Although Kenya’s 2010 Constitution and subsequent legislation restrict conflicts of interest, the Bank said implementation remains a challenge. The SGR findings form part of a broader assessment of how corruption has increased Kenya’s public expenditure, weakened revenue collection and contributed to the country’s growing debt burden. According to the report, corruption and collusion are estimated to widen Kenya’s annual fiscal deficit by approximately two percentage points of gross domestic product. “This translates into substantial additional borrowing needs accumulating over time,” the World Bank warned. The Bank further established that governance weaknesses increase the cost of government borrowing by raising investors’ perception of sovereign risk. It estimated that improving Kenya’s corruption indicators to levels comparable with Ghana, Senegal or Côte d’Ivoire could reduce external borrowing costs by 0.5 to one percentage point, generating annual savings of US$50 million to US$100 million. Kenya had approximately US$10 billion in outstanding external bonds and commercial borrowing as of early 2026. The report also calculated that reducing expenditure leakages in public procurement by 10% could save approximately KSh120 billion (US$930 million) in the 2026/27 financial year. Improved tax compliance could generate an additional KSh50 billion to KSh60 billion, while lower interest payments could save another KSh12.8 billion annually. Combined, the measures could generate savings of approximately KSh192.8 billion annually, equivalent to 18% of Kenya’s planned budget deficit for 2026/27. The Bank said these improvements could strengthen public finances without reducing government service delivery. Kenya has accumulated substantial deb…