Treasury tapped a Sh36 billion concessionary loan from China to pay arrears and allow works to resume on 16 roads under construction by the country’s firms, underlining the mounting struggles to fund such projects.
Cabinet Secretary for the National Treasury John Mbadi said the loan was tapped from China Development Bank and targeted roads where less than 25 percent of the works have been done.
Revelations of the soft loan highlight the woes facing the Exchequer in funding road projects and repaying Sh167 billion owed to both local and foreign firms on the works.
Concessional loans are cheaper compared to commercial credit and usually have lower interest rates than those prevailing in the market and a grace period where the borrower can go for years before starting repayments.
“We managed to get a concessionary loan with China Development Bank which is equivalent to Sh36 billion. This loan is for 16 roads which are being done by Chinese contractors,” Mr Mbadi said.
“The pending bills for roads are huge at Sh167 billion and you need three years to just pay, that is why the government adopted a model to take some of the roads under Chinese contractors and negotiate with the Chinese government to fund them (roads) from their money through concessional loans.”
The loan was tapped last month when Mr Mbadi and other top government officials accompanied President William Ruto to Beijing for the Forum on China-Africa Cooperation.
Road construction works in most parts of the country have stalled over unpaid bills, hurting efforts to create jobs because the projects are labour-intensive.
The Treasury allocated Sh40 billion to clear pending bills for roads in the financial year that ended June 2023, amid funding hitches.
Road projects have over the years turned out to be a key avenue that the State uses to create casual jobs for thousands of unemployed Kenyans given the struggles of the economy to create employment opportunities.
Early this year, the Ministry of Transport told Parliament that it would take Kenya more than 12 years to clear the colossal debts owed to road contractors.
The value of certified road works that have not been paid for stood at Sh650 billion as of June last year and the amount was projected to hit Sh700 billion if works arising from el Nino rains are considered.
Chinese firms dominate the high-value road construction projects in the country, with Beijing providing a vast chunk of the money used to fund them.
This (loans for road projects) has made Beijing one of the single biggest creditors to Kenya at a time when debt servicing is eating upwards of 70 percent of the taxes collected.
