Agency plans Sh30 billion roads maintenance bond

The Kenya Roads Board will issue a second Sh30 billion roads bond this year to source funds for maintenance which has been lagging for decades due to insufficient funding.

The 10-year bond will be backed by the close to Sh70 billion collected from motorists through the Roads Maintenance Levy Fund.

This will make it the first bond to be backed by the levy charged at Sh18 per litre of fuel at the pump.

KRB Acting Executive Director Rashid Mohamed said necessary preparations were in top gear to facilitate the floating of the bond which is expected to be a major boost for roads maintenance.

“We have an annual need for about Sh100 billion to maintain our roads and this gap keeps growing with financial short falls. This bond will help us stem that growing shortfall and make a new approach for us to leverage on the collections from the fuel levy,” Mr Mohamed said.

The roads sector regulator in May issued a Sh70 billion bond through the Central Bank of Kenya which was backed by its Sh65 billion annual allocations from the National Treasury.

The 10-year bond was oversubscribed by Sh10 billion at an interest of 12.5 percent, giving impetus to the use of KRB as a key financing vehicle for road maintenance.

The KRB boss said agencies had been asked to submit their road maintenance needs to book a share of the Sh30 billion expected to be raised at almost the same interest or close to the prevailing Treasury bill rates.

Bond issuance to source for funds for maintaining roads is a long break from the traditional road toll and fuel levy approach where KRB would disburse the fund to road agencies and county governments every year to keep roads in good shape.

The move was made possible after a legal framework was completed by MPs to enable the floating of such debt instruments.

The enactment of the Kenya Roads Board Act 2019 on December 6 gave the agency the power to borrow and leverage the Kenya Roads Fund as Transport and Infrastructure Cabinet Secretary James Macharia embarked on changing KRB in readiness for its new model to seek funds for roads maintenance.