NAIROBI, Kenya - The National Treasury has released Sh104 billion in a critical financial maneuver aimed at clearing a mountain of debt owed to road contractors and restarting stalled projects across the country, Treasury Cabinet Secretary John Mbadi confirmed on Wednesday, November 5, 2025. Of this amount, Sh93 billion has already been disbursed to contractors, providing immediate liquidity to a sector choked by long-standing pending bills totalling Sh175 billion.

The funds were raised through a short-term bridge facility from a syndicate of commercial banks, including the Trade and Development Bank, KCB Bank Kenya, Absa Bank Kenya, and UBA Kenya. This move is a precursor to a larger Sh175 billion infrastructure bond planned for issuance later this month. "On the Kenya Roads Bond, we started off by going for a bridge facility where we have raised KSh104 billion. This shall be extinguished once the bond issue is finalized," Mbadi stated in Nairobi.

A New Financing Model

The entire financing arrangement is anchored on an innovative model known as securitization. The government is leveraging future revenues from the Road Maintenance Levy Fund (RMLF) as collateral. Kenyan motorists pay a Sh25 levy for every litre of fuel, and the government has ring-fenced Sh7 of this to guarantee repayments to the bond investors. This allows the Treasury to convert a future, predictable revenue stream into immediate capital, addressing the present crisis without directly taking on more conventional debt.

This financial strategy comes as the government grapples with a ballooning pending bills crisis, which stood at over KSh 524 billion across all sectors by June 2025, according to the Controller of Budget. These unpaid obligations have been blamed for stifling economic growth, crippling small and medium-sized enterprises (SMEs), and leading to widespread job losses and business closures. The construction sector has been particularly hard-hit, contracting for two consecutive quarters into late 2024.

Economic Ripple Effects

The injection of funds is already showing positive results. CS Mbadi noted that the construction industry has rebounded, posting 5.9 per cent growth in the last quarter, a recovery he directly attributes to the payment of contractors. "When we had a 2.9 negative growth in construction... we realized that one of the reasons why... is because the road sector stalled completely due to pending bills," Mbadi explained. The resumption of over 500 stalled road projects is expected to have a significant multiplier effect, boosting related industries like cement, steel, and transport, and creating employment.

However, the securitization model has drawn scrutiny, particularly from the International Monetary Fund (IMF). While the Treasury argues that this financing structure should not be classified as standard sovereign debt, the IMF reportedly holds a different view. CS Mbadi confirmed that follow-up discussions are planned to reach a consensus on its treatment under Kenya's debt sustainability framework.

The Path Forward

The successful issuance of the full Sh175 billion bond this month is the government's ultimate goal to fully settle the road sector's arrears and refinance the bridge loan. The Cabinet has also approved a plan to securitize an additional Sh5 per litre from the RMLF to raise a further Sh125 billion, intended to cover current and future contractor bills, signaling a long-term shift in infrastructure financing.

A presidential task force on pending bills is expected to submit its final report next month, which will inform a comprehensive settlement plan for all government ministries and agencies. For now, the Sh104 billion facility offers a crucial lifeline to contractors and a tangible step towards clearing a fiscal bottleneck that has hampered Kenya's economic development for years. The long-term sustainability of this strategy will depend on disciplined fiscal management and the successful reception of the upcoming roads bond in the market.