World Bank Says Corruption Cost Kenya $900 Million on Railway

DAVID HERBLING & HELEN NYAMBURA

Kenya allegedly spent $900 million more than it should have for a Chinese-built railway because of rampant corruption, fraud and graft in one of the flagship projects of Beijing’s Belt and Road Initiative, according to the World Bank.

The East African nation paid $7.6 million per kilometer for a railway completed in 2017 linking the capital with the port city of Mombasa, a key project in China’s infrastructure diplomacy that saw it deploy billions of dollars in loans across the Global South.

In comparison, Tanzania and Ethiopia paid $5.7 million and $5.3 million per kilometer respectively for electrified lines, the lender said in an economic update on Kenya. “With the same cost metric as the Tanzanian line, Kenya could have saved up to $900 million in initial construction costs,” it said.

“Of this amount, at least 30% is considered attributable to governance challenges — the preference for direct contracting rather than competitive tendering; land speculation; and outright fraud around titling, valuation, and compensation payments — rather than topographic or technical differences.”

Kenya has a long-standing preference for awarding contracts to “connected parties — such as companies owned by public officials,” and has struggled to implement legislative changes to limit the practice, according to the report released Wednesday, November 4.

“Once contracts are awarded to connected companies, this also raises the likelihood of further collusion and cost markups during project execution,” it said.

Treasury Secretary John Mbadi, Principal Secretary Chris Kiptoo and government spokesman Charles Owino didn’t immediately respond to requests for comment.

Corruption and collusion in Kenya likely increase annual deficits by 2 percentage points of gross domestic product leading to inflated borrowing needs, higher loan costs and elevated public debt, it said.

There have been several court cases, investigations by Kenya’s anti-graft agency and parliamentary inquiries over other public infrastructure projects including roads, dams and pipelines.

The World Bank report also mentioned alleged misuse of funds in the construction of education facilities and collusion in the registration of fictitious entities to benefit from the shift to a new national health insurance system two years ago.

In 2024, the government was forced to cancel $2.6 billion in construction deals awarded to an Indian conglomerate without competitive procurement after protests and a court challenge.

Kenya ranked 130 out of 182 countries in Transparency International’s 2025 Corruption Perceptions Index.

A reduction in perceptions to a level similar to Ivory Coast, Ghana or Senegal would slash borrowing costs by as much as 100 basis points and create $100 million of savings annually, according to the World Bank report.

Bloomberg