Govt to Use Securitization to Settle Ksh175 Billion Road Debt

The Kenya Roads Board (KRB) has unlocked Ksh175 billion from the Road Maintenance Levy Fund (RMLF) through securitization.

What this means is that instead of waiting for the government’s annual budget or taking on more loans, KRB took Ksh7 out of every Ksh25 collected at the pump as a levy. 

According to the board, the money set aside means they can fund road works and pay debts instead of borrowing. The money will be used to revive 580 stalled road projects and pay contractors who have waited years for the settlement of the money owed to them.

“The KRB has successfully securitized Ksh7 out of every Ksh25 collected from the Road Maintenance Levy Fund (RMLF).

“This move, done through the creation of a Special Purpose Vehicle (SPV), has unlocked KSh 175 billion upfront to settle verified contractor arrears and revive over 580 stalled road projects across the country,” a statement from KRB read in part.

Also Read: KeNHA Clarifies on How Road Maintenance Levy Funds Will Be Spent

KRB on How Securitization Benefits Kenyans 

Consequently, the government will avoid allocating over Ksh100 billion in the 2025/26 national budget to clear old road debts.

Traditionally, the government has relied on annual budgetary allocations and external borrowing to fund road construction and maintenance. 

“As of 2024, the road sector was grappling with over Ksh175 billion in unpaid contractor bills, much of which was accruing interest and slowing down project delivery.

“In response, KRB’s securitization approach is expected to fast-track payments, restore contractor confidence, and boost economic activity through resumed construction,” added the board. 

That money can now be directed toward critical sectors like healthcare, education, and debt repayment.

Also Read: Kenyan Govt Borrows Ksh60 Billion to Pay Contractor Debts

Earlier Announcement to Pay Contractors

Earlier in March, National Treasury Cabinet Secretary John Mbadi secured Ksh60 billion ($464 million) in bridge financing from a consortium of banks to clear the debts owed to road contractors.

According to Mbadi, the loan was facilitated by the Trade and Development Bank and would be repaid using proceeds from the securitized road levy.

The government planned to issue a medium-term bond by the end of June to raise Ksh175 billion. However, part of the money will be used to refinance the short-term loan. 

Also, Mbadi asked contractors who are owed billions to waive up to 50% of the accrued interest.

The delays in payments have forced many contractors to stop work, slowing down demand for key construction materials like cement, bitumen, iron, and steel.

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