• Kenya plans to issue $1.3B in sovereign bonds to clear infrastructure arrears
• Funds to repay short-term loan, ease fiscal strain from stalled public projects
• Government eyes infrastructure and wealth funds to reduce debt reliance
  

The Kenyan government is planning to issue new sovereign bonds to raise 170 billion shillings (approximately $1.316 billion), according to local media reports attributed to Finance Minister John Mbadi.

The planned issuance aims to clear the large backlog of arrears owed to road construction companies and partially repay a 104 billion shilling short-term financing facility. That short-term loan was contracted from a consortium that included the Trade and Development Bank, KCB Group Plc, and Absa Bank Kenya Plc.

Managing Debt and Fiscal Pressure

The Minister reported that Nairobi has already repaid 93 billion shillings of the bridge facility. The bond initiative is part of a broader capital mobilization strategy, being executed amid significant fiscal pressure. Facing stagnating tax revenues and a growing public debt burden, the government is increasingly favoring public-private partnerships and instruments designed to attract private capital to limit its reliance on traditional sovereign borrowing.

Delayed payments are severely impacting economic activity, particularly for companies engaged in public works contracts. Beyond road infrastructure, similar financing constraints have affected other major projects, including the postponed expansion of the Jomo Kenyatta International Airport and the construction of the Standard Gauge Railway (SGR) network toward Uganda, a key regional integration project.

To provide a sustainable solution to its financing difficulties, Nairobi is considering launching a National Infrastructure Fund and a Sovereign Wealth Fund. These long-term mechanisms would aim to mobilize capital to support development and reduce the country's dependence on external debt.

Henoc Dossa