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Treasury stops Sh150 billion roads bond on IMF fallout fears

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The National Treasury Chief Administrative Secretary Nelson Gaichuhie. PHOTO | JEFF ANGOTE | NMG

Summary

  • Treasury CAS Nelson Gaichuhie told the National Assembly Transport roads committee that it has frozen the KRB fundraising via the bond in the wake of warnings from the IMF.
  • Mr Gaichuhie said roads bond would have breached terms of engagements with the IMF that were linked to the multi-billion shilling loans received from the multi-lateral lender.

The Treasury has slammed brakes on the floating of a Sh150 billion infrastructure by Kenya Roads Board (KRB) on fears of upsetting the International Monetary Fund (IMF) over the mounting public debt.

Treasury Chief Administrative Secretary (CAS), Nelson Gaichuhie told the National Assembly Transport roads committee that it has frozen the KRB fundraising via the bond in the wake of warnings from the IMF.

Mr Gaichuhie said roads bond would have breached terms of engagements with the IMF that were linked to the multi-billion shilling loans received from the multi-lateral lender.

KRB has been keen on roads bond to source funds for maintenance which has been lagging for decades due to insufficient funding. The bonds are backed by over Sh70 billion collected from motorists through the Roads Maintenance Levy Fund charged at Sh18 per litre of fuel at the pump.

“Any violations of these set limits will jeopardize the support that we expect from multilateral and bilateral development partners. At Treasury, we want to continue to explore other financing options for instrastrural development that will not adversely affect the debt sustainable level and microeconomic stability,” Mr Gaichuhie said.

The CAS told the lawmakers that within the 38 month period, the government committed to following the tight deficit path in order to reduce the debt accumulation.

“The proposed borrowing of Sh75 billion by Kenya Roads Board through a bond issuance to finance additional expenditure will expand fiscal debt and the level of borrowing beyond the authorized limit under the IMF programme,” Mr Gaichuhie said.

“As National Treasury we feel that if we allow KRB to borrow we feel that we might jeopardize our agreement with the multilateral and bilateral partners.”

As at July 2021 the CAS said the country's debt stood at 7.8 trillion which comprises 3.8 trillion domestic borrowing and Sh4 trillion from external sources.

The proceeds of the bond, which was to be floated in September this year, was supposed to be taken in two tranches of Sh75 billion and used to offset debt to contractors and finance the completion of ongoing road projects.

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