The government of Kenya through the Ministry of Transport, has made an announcement the resumption of the construction of more than 580 Kenya’s Stalled Roads Construction Projects across the country. This announcement comes months later after suffering a cash crunch.
This follows the Ministry of Transport securing Ksh175 billion in loans from private investors. This funds will be utilized to clear money owed to contractors and complete the stalled road projects countrywide.
Kenya’s Stalled Roads Construction Projects Factsheet
Number of stalled projects: Over 580 road projects.
Pending bills: The Kenyan government has been facing over Ksh 175 billio in unpaid bills owed to contractors for these stalled road projects.
Funding secured: The Ministry of Transport has secured Ksh 175 billion from private investors to clear contractor arrears and resume work on the stalled road projects. This is being achieved through a new financing model. The model involves securitization of future earnings from the Road Maintenance Levy Fund.
Also read: Kenya’s 170-Kilometer Nakuru-Nairobi Highway Construction to Commence in July
Source of Funds for Kenya’s Stalled Roads Construction Projects
The ministry explained that the funds to construct the roads were raised through the partial securitisation of revenue from the Road Maintenance Levy Fund (RMLF). This is the money obtained from the purchases of fuel.
What is Securitisation?
Securitisation refers financial mechanism that allows an institution to raise money in form of bond sales. These would later be offset using proceeds from collected levies.
Instead of taking on a traditional loan or waiting for funds to pile up slowly over time for the government to utilize in road construction, the institution bundles a portion of its expected cash flow and sells it to investors.
In order to address the issue of stalled roads across the country and pay pending bills, the government managed to raise Ksh175 billion from investors and committed Ksh7 out of every Ksh25 per litre of fuel levy collected to service the loan collected from investors for the next ten years.
Some of the Roads that Benefited from the Funding
Some roads that are currently under construction after the funding is the dualling of the Mombasa–Mtwapa road. Additionally, this road project is expected to be expanded for Ksh7.5 billion.
The 13.5 kilometre stretch is currently 42 per cent complete. It is expected to enhance regional connectivity, boost trade, and stimulate tourism.
Also read: $2 Billion Rironi-Mau Summit Highway Construction Commencement Set for August
