Kenya Railways Corporation slashed its operating loss by 65% to KSh 581.5 Million in the year ended 30 June 2025, delivering its strongest operational result in years as freight volumes hit a record 8.16 million tonnes and total revenue rose 18.6% to KSh 30.52 Bn.
- •The improvement counted for nothing at the bottom line: KSh 25.97 Bn in interest on the government's on-lent SGR loan left the state corporation with a net loss of KSh 28.17 Bn and a negative equity position of KSh 121.08 Bn.
- •The main income rose 7.9% to KSh 23.23 Bn, led by SGR freight revenues which grew 9.1% to KSh 19.42 Bn as haulage on the modern railway expanded 10.2% to 7.05 million tonnes.
- •On 19 March 2026, President Ruto broke ground on the KSh 500 Billion+ Naivasha-Kisumu-Malaba SGR extension (371 km), to be built by China Communications Construction Company but financed through securitisation of the railway development levy rather than new Chinese loans.
The Metre Gauge Railway contributed 1.11 million tonnes (up 11.1%) while the MV Uhuru vessel on Lake Victoria added 45,185 tonnes.
Net tonne kilometres surged 29.6% to 5.712 Bn, exceeding the corporation's 2027 strategic target two years early. Government grants jumped to KSh 7.77 Bn from KSh 2.92 Bn after the State Department of Transport transferred KSh 4.6 Bn for prior-year SGR maintenance costs.
Passenger numbers fell 10.3% to 5.06 million as a 50% fare hike on the Madaraka Express, implemented in January 2024, dampened demand. The Nairobi Commuter Rail declined 12.4% to 2.41 million riders, hit by service disruptions linked to socio-political unrest and flood damage that closed the Kikuyu-Longonot MGR section.
Total operating expenses grew just 5.8% to KSh 48.54 Bn against the 18.6% revenue increase, reflecting improved cost discipline with rail operational costs edging up 1.3% to KSh 17.93 Billion. Administration expenses fell 16.8%. Staff costs were the outlier, rising 13.8% to KSh 4.21 Billion.
Below the operating line, the on-lent loan consumed everything. Interest of KSh 25.97 Bn (down 10% on a stronger shilling) was capitalized onto the principal, pushing the loan balance to KSh 672.04 Billion. Default penalties added a further KSh 1.60 Billion, taking the cumulative penalty balance to KSh 6.90 Billion. A forex gain of KSh 2.54 Bn and a deferred tax credit of KSh 13.05 Bn partially offset these charges. Accumulated losses deepened to record KSh 198.47 Billion.
The financial statements omit material developments that occurred before the 22 December 2025 audit date.
- •In October 2025, the Treasury converted the three dollar-denominated China Exim Bank loans into yuan, halving the interest rate from approximately 6% to 3% and saving an estimated KSh 27.8 Bn annually.
- •In December, the loan maturity was extended to 2040 with a four-year grace period. Note 47 states there were no material subsequent events, a characterisation that is difficult to reconcile with the restructuring of the corporation's largest liability.
- •Treasury's own public debt update shows KRC arrears on the on-lent loan reached KSh 413.36 Bn by June 2025, a figure absent from the financial statements entirely. The SGR escrow account (KSh 53.99 Bn at year end) has never reached its KSh 25 Bn minimum balance threshold, effectively locking out all revenue-based loan repayments since commercial operations began.
The Auditor-General issued a qualified opinion on six grounds: 119 land parcels without ownership documents, KSh 16.91 Billion in completed projects misclassified as work-in-progress, a KSh 519.98 Mn unreconciled variance in rental income, KSh 1.28 Billion in long-outstanding receivables dating to 2011, SAP configuration weaknesses at the Railway Training Institute, and 1,981 freight invoices with no corresponding ERP entries.
Under lawfulness, the auditor flagged 529 illegally allocated land parcels across the country, 14 projects initiated with none completed, and disability employment at 0.4% against a 5% statutory requirement. Eight other prior-year issues remain unresolved.
Completion of the Naivasha-Kisumu section is targeted for June 2027.
Kenya Railways is operationally the strongest it has been since the SGR launched. Freight is growing, costs are controlled, and the operating loss is converging on breakeven. Whether that matters depends on whether the yuan conversion and maturity extension eventually flow through to the on-lent terms between Treasury and KRC, or whether the corporation remains structurally trapped: generating KSh 23 Bn in revenue against a KSh 672 Bn loan it has never once serviced from its own cash flows. No dividend was declared.
