President Uhuru Kenyatta’s successor will be forced to float a bond to pay off runaway arrears to road contractors and suppliers, according to a parliamentary report.
The plan for a road bond will likely put the country on a collision course with the International Monetary Fund which last year thwarted a similar plan to raise funds for the development and repair of the network.
The National Assembly’s Committee on Transport, Public Works and Housing in a report on expenditure estimates for the year starting July suggests the bills for Infrastructure Department have reached levels which cannot be offset through annual budgetary allocation.
“The committee recommends that the roads bond is floated within the first quarter of the financial year 2022/23 to address the problem of spiralling pending bills (for Infrastructure department),” the committee, headed by David Pkosing, wrote in the budgetary report before the House adjourned indefinitely ahead of the August 9 polls.
Pending bills for the State Department of Infrastructure — which is primarily in charge of roads and bridges — hit Sh121.56 billion last March, nearly three times Sh40.93 billion levels in June 2020.
In the first nine months of this financial year ending June 30, the department accumulated Sh33.25 billion more arrears compared with Sh88.31 billion at the end of the last financial year.
Road infrastructure has been one of the priority projects under President Kenyatta’s administration, but this has come with the burden of debt load on taxpayers largely through loans contracted from China.
Mr Kenyatta says his administration has built more than 11,000 kilometres of tarmac roads since taking power in April 2013, claiming the additional network is nearly six times that built by his three predecessors since independence.
“The naysayers said that we should not invest so heavily in infrastructure because people don’t eat roads and floating bridges,” the president said on June 1. “I refused their pessimism because I know what a new road means to the farmer who has for decades been unable to get their produce quickly to the market.”
Treasury last year froze a plan by the Kenya Roads Board to float as much as Sh150 billion infrastructure bond on grounds that it will expand public debt against the IMF’s conditions for $2.34 billion (Sh272.78 billion) three-year support against Covid-induced shocks.
KRB— tasked with the development, maintenance and repair of the road network — had planned to leverage more than Sh70 billion collected from motorists through the Roads Maintenance Levy Fund charged at Sh18 per litre of petrol at the pump to raise the funds.
“Any violations of these set limits will jeopardise the support that we expect from multilateral and bilateral development partners,” Treasury’s Chief Administrative Secretary Nelson Gaichuhie told the National Assembly last December.
“At Treasury, we want to continue to explore other financing options for infrastructural development that will not adversely affect the debt sustainable level and microeconomic stability.”
In a bid to ease pressure on government revenue, the government has in recent years cranked up construction of road projects under the Public-Private Partnerships framework.
The PPP framework allows private investors to build and own infrastructural projects for a given period to recoup their funds before ceding the ownership to the State.
The most notable successful mega road project under the build-operate-transfer (BoT) framework is the 27.1 km Nairobi Expressway linking Jomo Kenyatta International Airport (JKIA) to the James Gichuru junction on Waiyaki Way.
At Sh121.56 billion in arrears, the Infrastructure department accounted for 27.99 percent of the Sh434.5 billion pending bills at the national level by end of March, according to Treasury’s Quarterly Economic and Budgetary Review report.
“Continued delays in payment of pending bills to entities that provide goods and services to both National and County Governments have affected liquidity and operations of these entities. In a number of cases, this has led to the closure of businesses, affecting livelihoods of the suppliers,” Treasury secretary Ukur Yatani said on April 7.