Big ticket international contractors, mainly Chinese-owned firms, rejected a push by the government for a waiver of interest charges on the Sh650billion debt for road projects, although their local counterparts agreed to the request and forfeited Sh7.5 billion.
Martin Agumbi, the acting Director-General of the Kenya Roads Board (KRB) on Monday disclosed that pending bills drew interest charges of slightly more than Sh10.7billion with the government approaching more than 270 contractors to forfeit 70 percent of the amount in a return-to-work formula in which those who accepted the offer have since received a combined Sh123 billion as part-payment of the debt that accrued between 2005 and December 2024.
“We saved Sh7.5 billion as a result of the agreement that we struck with road contractors to waive 70 percent of the interest on the delayed payments, and it was significant in reducing the burden,” the KRB official told the Business Daily in an interview.
“We had 580 delayed projects, and of all these, only 10 percent of the contractors did not sign this return-to -work agreement; a majority of them are Chinese. We are still negotiating with them,” he added.
Mr Agumbi did not disclose the names of the international firms, adding that the government is hopeful of striking an agreement.
Under the return-to-work agreement, contractors received 40 percent of their dues in return for forfeiting 70 percent of the interest on the dues. A further 40 percent was paid within three months, easing a cash crunch that had hit the contractors.
The Exchequer received over Sh73 billion between April and June of 2025, enabling it to kick-start debt settlement and resumption of works.
A thinning fiscal space, largely due to huge loan repayments, has increasingly made it difficult for the Exchequer to free up funds for other items like clearing debt owed to road contractors.
The struggles forced the government to securitise part of the Roads Maintenance Levy (RML) of Sh25 from every litre of diesel and petrol and use it to get commercial loans.
The government securitised Sh7 from the RML in 2024 and a further Sh5 from July last year, bringing the total to Sh12, which has been securitised to raise the billions needed to pay contractors.
Trade Development Bank is the lead arranger for the deals, which will see the State forfeit part of the RML collections to settle the loans.
Mr Agumbi added that the State is borrowing a further Sh120 billion this year to raise money and pay contractors whose works have been cleared from December 2024. This loan is backed by the Sh5 from the RML.
The first tranche of Sh60 billion is expected before June this year, with the remainder set for the financial year starting July 2025.
“We are using the Sh5 per litre that we securitised last year to raise Sh120 billion, out of these we expect to get Sh60 billion in the current financial year, and this will settle the new certificates that have been issued from last year,” Mr Agumbi said.
