Kenya is targeting to raise Sh50 billion through Public Private Partnerships (PPPs) to fund projects in the year starting July as it seeks to further move away from debt financing of the projects.
The Treasury made the disclosures in the draft Budget 2024 Policy Statement saying that the projects target key areas such as power generation and transmission, roads, water and aviation.
Kenya has in recent years turned to PPP funding to finance costly projects without adding to the country’s debt, a shift from the yester-years where commercial loans funded key projects.
“The PPP Directorate has a pipeline total of 31 projects at various stages of the PPP project cycle, with most of them being at the procurement stage,” the National Treasury says.
“With these PPP pipeline projects, the Government envisages mobilizing Sh50 billion within the next 2024-25 financial year.”
The government is eyeing grand infrastructure projects to deliver water for agricultural, industrial and human consumption, widen the road network and also modernise the Jomo Kenyatta International Airport (JKIA).
But a thinning fiscal space due to fast-maturing debt payments has squeezed the ability of the Exchequer to fund them or source for fresh commercial debt, highlighting the critical role of the PPP model in driving grand infrastructural projects.
Grand infrastructure projects such as the Standard Gauge Railway were financed through expensive Chinese loans. But servicing the debt has turned into a nightmare for the government.
Servicing of domestic and external debt ate an equivalent of two-thirds (Sh347.22 billion) of tax revenues in the first quarter of this financial year, highlighting the impact of the loans.
The debt obligations are fast-rising this financial year ending June 2024 largely due to the maturing semi-concessional and commercial borrowing tapped to build roads, bridges, power plants and a modern railway line.
Kenya in 2021 enacted changes to the Public Private Partnerships Act of 2013 in a bid to reduce bureaucracies and woo investors keen to partner with the State in delivering the projects.
Through the Public Private Partnerships Act, 2021 which repealed the previous Act of 2013, public entities in PPP deals are now allowed to single-source work in a bid to speed up projects.
