Kenya to sell bond to fund roadworks

A Kenyan government agency plans to offer 150-billion shillings ($1.46bn) of bonds to fund repairs to roads that have suffered from neglect.

The Kenya Roads Board is seeking approval from the treasury to begin a July offering of the first tranche of debt. It will be backed by a tax on fuel imports, which provides a steady income, according to executive director Jacob Ruwa.

The nation, which has about 161,450km of mostly unpaved roads, needed to spend about 400-billion shillings on longdelayed upgrades and maintenance, Ruwa said.

“We decided to go for other funding methods to close this funding gap because it’s difficult to raise the fuel levy further after a 2016 increase,” he said.

The financing would be directed to roads authorities and county governments to hire contractors for the work.

Kenya, East Africa’s largest economy and a major exporter of black tea and cut flowers, wants to overhaul its road network and improve links between its cities.

WE DECIDED TO GO FOR OTHER FUNDING METHODS TO CLOSE THIS FUNDING GAP FURTHER

President Uhuru Kenyatta’s government in 2015 announced a road annuity fund to expedite construction, which would involve contractors paying for the expansions then being reimbursed on completion.

The fund, which stood at 24-billion shillings in June, had not yet been spent because of a slow uptake by private investors, Ruwa said.

Kenya’s fuel levy collected 69-billion shillings in the 12 months to June, compared with 51-billion shillings a year earlier, according to the roads agency.

A similar 50-billion shilling bond suggested in 2015 was delayed because of interest rate volatility, he said.