National Treasury Cabinet Secretary John Mbadi has revealed when the government will issue a Ksh175 billion ($1.36 billion) securitised bond aimed at funding road construction projects.
Speaking to Reuters on Tuesday, November 4, 2025, CS Mbadi said the government plans to issue the bond within this month (November), following months of preparation.
The bond will be backed by the road levy component, which is included in the retail price of fuel. Mbadi added that the government has already secured a KSh93 billion syndicated loan against the expected proceeds of the bond.
Kenya, facing rising public debt levels, is exploring new financing mechanisms for infrastructure projects, including the securitisation of specific revenue streams and borrowing against them.
Mbadi on talks with the IMF
While the government favours this approach to avoid adding to the national debt, the International Monetary Fund (IMF) holds that such borrowing should be classified as standard public debt. CS Mbadi noted, however, that he remains confident that an agreement will be reached with the IMF on the classification of the bond.
Also Read: CS Mbadi Explains Why IMF is Delaying a New Loan for Kenya
In September, Transport and Infrastructure Cabinet Secretary Davis Chirchir defended the Ksh175 billion roads bond deal, assuring that it poses no risk to public debt.
CS Chirchir, while appearing before the National Assembly’s Budget and Appropriations Committee, noted that the transaction is part of a long-term financing arrangement with the Trade and Development Bank (TDB).
According to the CS, the State Department for Roads allocated Ksh7 from the Road Maintenance Levy Fund (RMLF) to a Special Purpose Vehicle (SPV) to facilitate the bond facility in February 2025.
The funds were used to settle the department’s pending bills and financial obligations. Chirchir emphasised that the government did not issue any sovereign guarantee for the transaction.
“No guarantee has been issued by the Government of Kenya for this transaction. The risks rest with the purchaser of the receivables, the SPV. This does not sit in government books and has no implication on public debt ceilings,” CS Chirchir said.
Ksh30 billion paid to fund road projects across the country
Last month, the National Treasury announced that Kenya disbursed Ksh30.89 billion to banks and construction firms involved in building roads under the government’s annuity programme across 11 counties.
The annuity model allows private contractors to construct and maintain roads for a specified period, with the government repaying its share of the project cost through scheduled instalments once construction is completed. Under this arrangement, both the government and contractors share the total project cost.
Also Read: Govt to Use Securitization to Settle Ksh175 Billion Road Debt
Contractors typically obtain loans from commercial banks to finance their portion of the work, which the government later reimburses over time. This ensures continuous maintenance and completion of the roads without putting immediate pressure on public finances.
According to Treasury records, Ksh20.56 billion was paid to lenders that financed the construction of 90.55 kilometres of roads in Kajiado County. Another Ksh5.94 billion was allocated to 44.72 kilometres of roads linking six counties in central Kenya, while Ksh4.39 billion covered 35.3 kilometres of roads in western Kenya.
In Central Kenya, Lot 15 connects towns in Nyeri, Kirinyaga, Murang’a, Embu, Laikipia, and Tharaka Nithi, and has been operational since February 2022. Lot 18, located in western Kenya, links Kakamega, Vihiga, Bungoma, and Busia counties.
“Based on the respective SPs (service providers) financial performance and the directors for the seven projects are of the opinion that the companies will continue operations for the foreseeable future,” the Treasury stated.
The three projects have a combined value of approximately $230.92 million (Ksh29.82 billion), covering a total of 170.57 kilometres of roads. Contractors under the programme have agreed to operate and maintain the roads for 10 years, during which they will recover their investment and repay loans obtained from banks.
The annuity programme was introduced to help the government develop key road infrastructure without placing an immediate burden on public finances. Payments to investors are drawn from the RMLF.
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