Will the National Infrastructure Fund break Kenya’s debt cycle?

As the National Assembly begins its review of the National Infrastructure Fund (NIF) Bill, 2025, a central question has emerged: Is this new Fund just a sophisticated way for the government to pile on more debt?

Kiharu MP Ndinid Nyoro has expressed concern about whether the fund is a hidden way of borrowing disguised as an investment. 

However, the architects of the bill argue that the fund is designed to be the antidote to Kenya's debt addiction, not a refill.

For decades, Kenya has relied on high-interest sovereign loans and annual Treasury allocations to build roads and power plants. The NIF Bill proposes a structural exit from this model.

Instead of borrowing from international banks, the fund aims to mobilise Sh5 trillion by inviting domestic pension funds, climate finance partners, and private investors to become equity or debt partners in specific projects. 

National Assembly Majority Leader Kimani Ichung’wa said the establishment of this fund will significantly enhance the country’s capacity to deliver transformative infrastructure projects in roads, railways, energy, water infrastructure, and other strategic national assets across the country.

The policy rationale is that by using blended financing, the state can build infrastructure without the immediate hit to the national budget.

Lawmakers wary of the proposal argue that government-backed funds can sometimes create debt that does not immediately appear on official balance sheets. 

These are known as contingent liabilities, which are situations where the government promises to step in if a project fails to repay its financiers.

The Bill attempts to calm those fears through three key safeguards.

First, any guarantee or letter of comfort issued through the fund must be counted under Kenya’s legal debt ceiling of 55 per cent of GDP. 

This means such commitments cannot sit outside official debt figures. If the state makes a promise, it must be disclosed and included in the country’s overall debt exposure.

Second, the Cabinet Secretary will not have unilateral powers to extend government support. 

Any guarantee or state-backed financial commitment tied to a project must receive prior approval from Parliament, introducing a layer of legislative oversight.

Third, the bill explicitly bars the fund’s board from borrowing money or taking credit in the name of the fund. In effect, the NIF cannot independently accumulate debt on its own balance sheet. Its mandate is limited to financing specific infrastructure projects within the legal framework set out in the law.

Under the new law, every project must undergo a rigorous "value-for-money" test and a commercial viability assessment before a single shilling is committed. 

Furthermore, the fund is required to hit "expected rate of return thresholds," meaning it must function like a business that protects its capital rather than a department that simply spends its budget.

By moving infrastructure costs to a portfolio of private and institutional investors, the bill claims it will actually "free resources" for education and health that would otherwise be swallowed by debt servicing.

Whether the NIF becomes a genuine investment platform or a "silent exposure" for the taxpayer will depend on the transparency of its annual aggregate exposure disclosures and the independence of its board in resisting "political urgency" over technical review.