Kenya is adopting new financing strategies for major infrastructure projects as rising public debt and limited fiscal space make traditional government funding increasingly difficult.
Treasury Cabinet Secretary John Mbadi says the government is shifting toward private capital and innovative funding models that reduce risks which have historically discouraged investors from financing large public projects.
Speaking during an interview on the Citizen TV programme The Explainer, Mbadi said the government will rely on the newly established National Infrastructure Fund (NIF) to prepare projects and make them more attractive to institutional investors.
“As a country, we were already in agreement even before the last general election that our debt levels had reached distress levels,” Mbadi said.
He noted that increasing taxes is becoming more difficult as citizens grow more sensitive to new levies, even as the demand for public services continues to rise.
“Otherwise we would continue borrowing more or overtaxing our people with the consequences of social unrest,” he added.
Shift Toward Blended Financing
Large infrastructure developments such as highways, airports, ports and power plants typically require billions of shillings to build and have traditionally relied on government funding or foreign borrowing.
Under the new strategy, the government plans to adopt blended financing models that combine public support with private investment, particularly for projects that can generate revenue.
Mbadi said private investors often hesitate to finance projects in developing markets because of uncertainties ranging from political changes to regulatory delays and legal challenges.
“Projects from the design stage to completion carry many risks, some of them political,” he said.
“Kenyans are very litigious. An investor may start a project and then face court challenges, which makes them apprehensive.”
Preparing Projects for Investors
The National Infrastructure Fund will play a central role in addressing these concerns by preparing projects to an “investment-ready” stage before inviting private investors.
This preparation process will involve feasibility studies, detailed project design, return-on-investment assessments, and financial structuring. The fund will also invest directly in some projects to absorb part of the initial risk, making them more attractive to private financiers.
To further reduce exposure, projects will be structured through Special Purpose Vehicles (SPVs). These are independent legal entities that hold a project’s assets, revenue streams and debts separately from government accounts.
Such structures allow investors and lenders to assess the financial viability of each project independently while distributing risks among multiple stakeholders.
Target Sectors for Investment
The government is focusing on infrastructure that can generate steady revenue streams capable of repaying investors over time.
These include toll roads, airports, seaports, and energy projects where income can be generated through user fees, cargo charges or passenger levies.
Mbadi also identified energy generation, power transmission networks, irrigation systems and large water dams as sectors with strong potential to attract private investment.
By properly preparing projects, sharing risks and creating predictable financing structures, the government hopes to unlock billions of shillings in private capital while reducing pressure on public debt.
“This fund is meant to crowd in private capital by de-risking projects so that investors can participate with confidence,” Mbadi said.
The establishment of the NIF signals a broader shift in Kenya’s development financing strategy, moving away from reliance on public borrowing and taxation toward public-private partnerships that aim to support sustainable infrastructure growth.
