(Bloomberg) --
Kenya should spend 1 trillion shillings ($10.2 billion) over the next five years if it is to clear a backlog of required new roads and maintenance, according to a state agency.
The Kenya Roads Board and other state organizations are preparing a schedule of projects to present to potential investors in infrastructure bonds that are likely to be issued in the first quarter, according to Executive Director Jacob Ruwa said.
Lawmakers passed legislation on Thursday giving KRB the authority to issue securities backed by its revenue so that any debt by the agency is off the government's balance sheet. The president approved the new law on Friday, paving the way for KRB to raise as much as $3.5 billion in shilling-denominated bonds.
“We want to move very quickly on this,” Ruwa said in an interview. “It will take about a month to develop the program.”
March Issue
The revenue-backed securities will be floated in tranches with the first 150 billion shillings potentially issued in March, Ruwa said on Thursday. KRB collected 72 billion shillings in the year through June from a road maintenance fuel levy of 18 shillings per liter of gasoline and diesel.
KRB bonds will naturally increase the country's debt burden, according to Christopher Olobo, an investment analyst with the International Finace Corp. “I would suggest that for specific projects, a consideration be made for supporting the issuance of project bonds by project sponsors other than the government,” he said in an emailed response to questions.
KRB has not yet determined the tenor for the bonds, he said. GCR Ratings gave a draft KRB information memorandum prepared in 2016 a AAA rating.
Kenya's classified road network covers 161,000 kilometers (100,040 miles), 38% of which is in a poor and dilapidated condition, Ruwa told journalists in the capital, Nairobi.
To contact the reporter on this story: David Herbling in Nairobi at dherbling@bloomberg.net
To contact the editors responsible for this story: David Malingha at dmalingha@bloomberg.net, Helen Nyambura, Hilton Shone
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