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Roads bond faces debt agency test

Ngong Road
The construction of Ngong Road in Nairobi on October 28, 2019. PHOTO | SALATON NJAU | NMG 

Kenya Roads Board will need the National Treasury approvals for the proposed roads bonds as a new debt policy comes into place next month.

President Uhuru Kenyatta has said the government would float an infrastructure bond of Sh150 billion, with the funds going to the completion of all ongoing road and infrastructure projects.

However, with the new policy, the issue will have to pass strict guidelines that limit commercial loans to profitable projects and require vetting before funding can be committed.

“The law requires that they come to us for approval. They will have to be dealt with within this policy,” said Public Debt Management Office Director-General Harun Sirima.

“If your borrowing is such that it will undermine the debt strategy then it is a public policy. We can’t allow it to happen.

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“And by the way, there are many parastatals which come asking for borrowing and they are told no.

“The point here is this idea of approving on an ad hoc basis is what we need to remove such that we inculcate a culture of transparency such that everybody knows. For instance, you cannot borrow externally because you are harming our debt sustainability,” he said.

The International Monetary Fund (IMF) has criticised the government for accumulating projects without having a plan of how to fund or complete them.

Out of 1,000 projects, 500 have stalled due to non-payment to contractors, especially the State Department of Infrastructure, which has accumulated pending bills worth Sh78 billion in June 2019.

The IMF said some projects did not follow the laid down procurement procedures and were either single-sourced or had deals struck in boardrooms. “Several large government-to-government contractual arrangements, such as the Nairobi-Mombasa SGR project, operate outside the standard procurement process,” IMF said.

To deal with this, the government last year approved a controversial law allowing the Kenya Roads Board to borrow up to Sh360 billion for road repairs and maintenance that will not appear in the country’s debt register.

It gave the State agency, which manages road maintenance levy and transit tolls, the power to issue bonds backed by taxes on fuel imports and annual budgetary allocations for roads.

The independent debt office, however, said this is public debt and will have to be approved before it is procured.

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