Hundreds of road contractors are set to resume work this week after the government received Sh63 billion to pay pending bills, unlocking an impasse that stalled more than 580 projects.
Roads and Transport Cabinet Secretary (CS) Davis Chirchir last Friday said that Kenya had received the money and that an additional Sh10 billion is expected next week to fully clear the debt owed to over 270 contractors by July this year.
Contractors (both foreign and local) laid down tools over government's failure to pay them billions of shillings for both ongoing and completed works, some dating back to as early as 2016. The debt was estimated at over Sh650 billion as of July last year.
Mr Chirchir says that the loan will be paid via cash that will be raised through a Sh175 billion bond that Kenya will float in the coming months, targeting to raise 80 percent of the cash in the foreign markets and the remainder locally.
Failure to pay the contractors has been attributed to a thinning fiscal space as the Treasury grapples with mounting debt payments that have left little cash for other items like pending bills and development projects.
“Today we have received the Sh63 billion, and we have signed a return to work formula with them. In the next few days, the contractors will be back on site,” Mr Chirchir said on Friday.
Some of the contractors are owed upwards of Sh10 billion, highlighting the cash crunch that has seen some face the auctioneers' hammer over their inability to pay debts.
Mr Chirchir added that contractors had agreed to write down up to 35 percent of the interest on the delayed payments, in a bid to ease pressure on the government.
The Trade Development Bank and Africa Exim Bank are the lead arrangers of the bond that will be floated later this year, in a move meant to ensure that billions of shillings will be raised off the government’s balance sheet.
“The government’s preference is to raise a bond and we will have that money coming in at about eight percent. Part of the proceedse will be used to pay the bridge facility that we have received,” Mr Chirchir added.
Under the plan (bond), the government will transfer its right to receive a portion of the Road Maintenance Levy Fund (RMLF), approximately 28 percent for 10 years. Investors will then receive returns tied to these levy collections.
The RMLF was increased from Sh7 per litre to Sh25 for every litre of super petrol and diesel in July last year, as the State moved in to boost collections amid the fast-rising burden of pending bills in the roads sector.
Days after increasing the levy, the government said that it would ring-fence collections into the RMLF to clear the billions of shillings owed to firms that have been tapped by the government to build, upgrade, and repair roads.
