Kenya Plans KSh 175 Billion Securitised Bond to Finance Road Construction Projects

Kenya, 4 November 2025 - Kenya is preparing to float a Sh175 billion ($1.36 billion) securitised bond this month as part of an ambitious plan to fund key road construction and rehabilitation projects across the country.

The move, announced by Treasury Cabinet Secretary John Mbadi, signals the government’s growing shift toward alternative financing mechanisms amid rising debt levels and tightening fiscal space.

The securitised bond will be backed by a road maintenance levy, a key component included in the retail price of fuel.

This structure allows the government to convert future revenue streams into immediate capital, providing the much-needed resources to accelerate infrastructure development without directly expanding conventional debt.

In anticipation of the bond proceeds, the government has already secured a KSh 93 billion syndicated loan, using the expected bond earnings as collateral.

This early financing aims to ensure that ongoing road projects do not stall as the bond issuance process gets underway.

“The government is confident this approach will enable us to fast-track road projects while maintaining a prudent borrowing framework,” said CS Mbadi during the announcement.

The Treasury has also been engaging with the International Monetary Fund (IMF) to discuss the treatment of securitised debt under Kenya’s existing financial arrangements.

CS Mbadi confirmed that follow-up meetings are planned to reach a consensus on whether such instruments should be classified as normal debt or as revenue-based financing.

According to Mbadi, the government views securitisation as a strategic financial innovation that reduces direct pressure on the national debt while keeping development on course.

However, the IMF is said to prefer categorising the bond as standard debt, a position that could affect Kenya’s overall debt sustainability metrics if maintained.

Kenya’s previous $3.6 billion programme with the IMF expired earlier this year, and discussions are underway to develop a new framework that may include a lending component.

Analysts believe a renewed IMF engagement would not only enhance investor confidence but also anchor Kenya’s external debt repayment strategy.

The securitised bond, if successful, will mark a significant milestone in Kenya’s fiscal policy, setting a precedent for using domestic revenue streams to fund large-scale projects.

It may also open new doors for similar instruments in sectors such as energy, water, and housing, as the government seeks sustainable solutions to bridge its development financing gap.