Treasury blocks roads board from pursuing Ksh.150 billion bond
The Kenya Roads Board (KRB) has been blocked from floating the intended Ksh.150 infrastructure bond in what the National Treasury says would risk Kenya’s debt sustainability level.
“The proposed borrowing of Sh75 billion by Kenya Roads Board through a bond issuance to finance additional expenditure will expand fiscal debt and the level of borrowing beyond the authorised limit under the IMF programme,” said Treasury Chief Administrative Secretary Nelson Gaichuhie.
The proceeds of the bond which had been scheduled for September this year was supposed to be taken in two tranches.
Ksh.75 billion was to pay off debt to road contractors and finalise the ongoing construction works.
The Central Bank of Kenya (CBK), and Attorney-General Paul Kihara had already approved the sale of the bond.
According to Infrastructure Principal Secretary Paul Mainga Tuesday before the National Assembly Roads Committee argued that the bond was to ease the Treasury from the current debt stress its already facing.
“The reason we are interested in the bond is so that we can free the National Treasury of the burden of having to sort out our bills. It’s an urgent matter that requires decision making so that we can move forward,” said Prof Mainga.
But Treasury worries that the bond could jeopardise Kenya’s agreement with its multilateral development partners on the current debt sustainability level.
Kenya’s debt has so far hit Ksh.7.8 trillion, out of which Ksh.3.8 comprises domestic debt while Ksh.4 billion represents external debt.
Kenya has gone the South African way of financing roads through bond issuance, away from the obvious way of road toll fee and fuel levy means.
Kenya is currently in a 38-month Ksh.255 billion debt servicing programme with the International Monetary Fund (IMF) and Treasury worries that allowing KRB to borrow will go against the rules issued by IMF.
The loan was approved on April 2 and is expected to help Kenya’s fight against the coronavirus pandemic.