Treasury stops 150 billion shillings road bond following IMF debt warning
- CAS Treasury Nelson Gaichuhie told the National Assembly’s Transport Roads Committee that he has frozen KRB fundraising via bond following IMF warnings.
- Gaichuhie said the road bonds allegedly violated the terms of commitments with the IMF that were tied to multibillion shillings loans received from the multilateral lender.
The Treasury has held back the launch of a 150 billion shillings infrastructure by the Kenya Roads Board (KRB) for fear of upsetting the International Monetary Fund (IMF) over rising public debt.
Chief Administrative Secretary of the Treasury (CAS) Nelson Gaichuhie told the National Assembly’s Transport Roads Committee that he has frozen KRB fundraising via bond following IMF warnings.
Gaichuhie said the road bonds allegedly violated the terms of commitments with the IMF that were tied to multibillion shillings loans received from the multilateral lender.
KRB has been keen for road bonds to provide funds for maintenance, which has lagged behind for decades due to insufficient funding. The bonds are backed by over 70 billion shillings collected from motorists through the Roads Maintenance Levy Fund which charges 18 shillings per liter of fuel at the pump.
âAny violation of these set limits will jeopardize the support we expect from multilateral and bilateral development partners. At the Treasury, we want to continue to explore other financing options for infrastructure development that will not negatively affect the sustainable level of debt and microeconomic stability, âMr. Gaichuhie said.
The CAS told lawmakers that during the 38-month period, the government is committed to following the tight deficit route in order to reduce debt build-up.
Kenya Roads Board’s proposed borrowing of 75 billion shillings through a bond issue to finance additional spending will raise fiscal debt and the level of borrowing beyond the limit allowed under the IMF program “said Mr. Gaichuhie.
“As the Treasury, we believe that if we allow KRB to borrow, we believe that we could jeopardize our agreement with multilateral and bilateral partners.”
In July 2021, the CAS said the country’s debt stood at $ 7.8 trillion, including 3.8 trillion in domestic borrowing and 4000 billion shillings from outside sources.
The proceeds of the bond, due to be issued in September this year, were supposed to be drawn in two installments of 75 billion shillings and used to offset debt to contractors and finance the completion of ongoing road projects.