Kenya seeks 50B shillings from infrastructure bonds tap sale

Kenya seeks 50B shillings from infrastructure bonds tap sale

Kenya is set to issue a securitised bond worth Sh175 billion ($1.36 billion) next month to fund road construction, as part of its strategy to address mounting infrastructure financing pressures [1]. The bond, which will be backed by a portion of the fuel levy charged to motorists, will be split into two tranches—one for the local market and another for offshore investors. The government aims to tap both domestic and external markets to secure funding without adding directly to sovereign debt.

The securitised bond initiative is part of Kenya's broader infrastructure development plan, which includes the expansion of Nairobi's Jomo Kenyatta International Airport (JKIA). The airport, East Africa's busiest, has been struggling with congestion and ageing infrastructure, with plans for a second runway and new terminal building proposed since the early 2010s. However, successive funding arrangements have failed to materialize.

In a strategic shift, the government is now inviting international development lenders to finance the Sh258.56 billion ($2 billion) expansion project directly through the airport's balance sheet. Transport Cabinet Secretary Davis Chirchir has contacted several agencies, including the Japan International Cooperation Agency (JICA), China Exim Bank, German lender KFW, the European Investment Bank (EIB), and the African Development Bank (AfDB) [1]. The government hopes that involving multilateral development financiers will provide the project with the credibility and favorable loan terms needed to proceed.

Chirchir's comments signal a strategic shift in how Kenya approaches large-scale infrastructure projects. By financing and building assets through state-owned enterprises such as the Kenya Airports Authority, the government can later concession the completed facilities to private operators to recoup costs, rather than relying on long-term public-private partnerships from the outset.

The bond sale and the JKIA expansion project are part of Kenya's efforts to diversify its funding sources and improve its infrastructure. The government aims to leverage both domestic and external markets to secure the necessary funds, thereby mitigating the risk of adding to sovereign debt.

References:
[1] https://peopledaily.digital/business/kenya-invites-more-investors-to-fund-sh259b-jkia-upgrade