The government, through the Ministry of Transport, has announced the resumption of the construction of over 580 stalled roads across the country, months after suffering a cash crunch.
This follows the Ministry of Transport securing Ksh175 billion in loans from private investors to clear money owed to contractors and complete the stalled road projects.
The ministry explained that the funds were raised through the partial securitisation of revenue from the Road Maintenance Levy Fund (RMLF), which is money obtained from fuel purchases.
Securitisation is a financial mechanism that allows an institution to raise money in the form of bond sales, which would later be offset using proceeds from collected levies.
Rather than taking on a traditional loan or waiting for funds to accumulate slowly over time for the government to use in road construction, the institution bundles a portion of its expected cash flow and sells it to investors.
To address the issue of stalled roads across the country and pay pending bills, the government raised Ksh175 billion from investors and committed Ksh7 out of every Ksh25 per litre of fuel levy collected to refund the investors for the next ten years.
"This commitment was handed over to a Special Purpose Vehicle (SPV), which raised Ksh175 billion upfront from private investors," the ministry announced.
"The investors will be repaid directly from the fuel levy, not from the government budget over the years. Kenya Roads Board bears no risk of revenue shortfalls," it added.
In its communiqué, the ministry clarified that the funds acquired from investors would not, in any way, raise the price of fuel; rather, it would help curb further increases in fuel prices.
According to the ministry, this is because if fuel consumption drops or the collection of the fuel levy underperforms, it is the investors who would bear the losses as per the deal.
Among the roads currently under construction after the multi-billion shilling funding is the dualling of the Mombasa–Mtwapa road, which is set to be expanded for Ksh7.5 billion.
The 13.5 kilometre stretch is currently 42 per cent complete and is expected to enhance regional connectivity, boost trade, and stimulate tourism.
