Treasury launches special fund for upgrade of rural roads

The Treasury has announced plans to set up a special purpose fund in the next 14 days to finance the upgrade of selected rural roads to bitumen standards.

Treasury secretary Henry Rotich says the kitty - Roads Annuity Fund - will initially have a seed capital of Sh500 million – to meet the national government’s liability to contractors.

Under the State’s annuity roads financing plan, at least 10,000 kilometres of roads across the country will be built in a Public Private Partnership (PPP) model over 10 years.

The details are contained in the Road Annuity Regulations 2015 that the Treasury tabled in Parliament on Tuesday. The House is expected to approve the rules within two weeks.

“The Fund will provide resources to meet national government liability to contractors engaged to build 10,000 km of road under the programme, termed annuity payment obligations,” Mr Rotich says in the explanatory memorandum accompanying the regulations.

“The fund will also provide comfort to road developers (including contractors and financiers) that national government’s annuity payment obligations will be met when they fall due to rule out fears that pending bills will accumulate with respect to payment demands under the new mode of financing roads development.”

“Ultimately, the new system aims to move the country gradually to a ‘user-pay’ model for funding infrastructure projects outside the exchequer budget,’’ he adds.

READ: State says private engineers will oversee 10,000km road project

Under section 4 of the regulations, the initial capital of the fund will be Sh500 million appropriated by Parliament in the 2014/15 financial year.

“The officer administering the fund (Transport principal secretary) shall ensure that sufficient funds are available in the bank account, in accordance with the funding obligations set out in project agreements,” the rules states.

The rules obligate the PS to n ensure that a minimum of five per cent of the annual annuity obligations or Sh2 billion, whichever is lower, is maintained in the annuity payment obligations bank account.

The regulations spell out the conditions and procedures under which the annuity obligations are to be financed and circumstances when payment requests may be rejected.

An Oversight Committee for the Special Fund will consist of PS finance (chairperson), roads PS (secretary), Planning PS, attorney- general, a representative of the Kenya Bankers Association and two eminent professionals appointed by Treasury PS.