Economy

State targets bond, annuity cash to clear Sh32 billion infrastructure debt

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Road construction in Othaya, Nyeri County. PHOTO | JOSEPH KANYI

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Summary

  • The State is banking on a 10-year roads bond, the Roads Annuity Fund and the Public Private Partnership (PPP) model to raise cash to finance infrastructure and clear pending bills that stand at Sh32 billion.
  • The Kenya National Highways Authority (KeNHA) says proceeds of the bond will meet part of the pending development bills and commitments of Sh26 billion as well as accrued interest of Sh6.4 billion as at end of June 2019.

The State is banking on a 10-year roads bond, the Roads Annuity Fund and the Public Private Partnership (PPP) model to raise cash to finance infrastructure and clear pending bills that stand at Sh32 billion.

The Kenya National Highways Authority (KeNHA) says proceeds of the bond will meet part of the pending development bills and commitments of Sh26 billion as well as accrued interest of Sh6.4 billion as at end of June 2019.

The interest arose due to delayed payments of contractors for works done over a period of 10 years.

Mr David Muchilwa, the acting director-general, KeNHA, said the Treasury increased the Fuel Levy from Sh12 per litre to Sh18 to cater for the roads Annuity Fund. The annuity constitutes a Sh6 per litre charged on motorists. The annuity fund is managed by the Treasury.

The official, however, failed to disclose the amount of cash that the government seeks to raise from the 10-year bond.

“I am not aware how much the Kenya Roads Board is planning to raise from the 10-year bond,” he said.

He said the Ministry of Transport, Infrastructure Housing, Urban Development and Public Works, successfully sought a change of law through the Kenya Roads Board Act, 2019 to raise a 10-year road debt bond from the open market to finance pending development bills and commitments to completion of projects.

“The National Treasury developed a new model of project financing using proceeds from Road Annuity Fund and the public private partnership (PPP),” he said.

Appearing before the National Assembly’s Public Investments Committee (PIC), Mr Muchilwa said proceeds of the bond will progressively reduce Kenya’s road development outstanding bill thus reversing it from a negative to positive working capital.

“We agree with the Auditor-General that KeNHA had a negative working capital of Sh26 billion as at June 2019. This was attributed to pending bills due to contractors, consultants and project affected persons that accrued due to insufficient budgetary allocation against KeNHA development requirement,” he said.

He said the huge deficit is also attributed to the Treasury’s budget reductions during the project implementation period.