US$ 547m is being sought for by the Kenya Roads Board (KRB) to help in financing road maintenance in the country by issuing asset-backed infrastructure bond this year. KRB has also been given a node to proceed with issuing an asset-backed security at the Nairobi Securities Exchange.
KRB confirmed that some more money will come from the road maintenance levy fund, which it annually collects at the rate of Sh9 per litre of diesel and petrol.
“We will securitize the fuel levy so we will be paying back the infrastructure bond from collections. The funds will help address the backlog of road maintenance,” said Jacob Ruwa, executive director of the KRB
The asset-backed bond will come in handy as it will aid in the clearance of the road maintenance accumulated backlog estimated to cost about US$438m, which has resulted from regular under financing of the country’s road sector.
By the end of June, 2014, 3.1 billion litres of diesel and petrol was used – totaling fuel levy collection hit US$ 306m in the same period, which is less compared to what KRB need for road maintenance.
The roads agency has complained that the charges of Sh9 a litre which has been applicable since 2006, is no longer sufficient given the rise in cost of raw materials, labour and transport which has affected cost of road maintenance.
They plan to develop, rehabilitate and maintain Kenya’s road network of 161,451 km, of which only 14,561 km is paved. Kenya has also started off 3000km of the total 10, 000km road rehabilitation/construction project.