Road contractors to resume work after Sh63 billion released to pay pending bills
The issue of unpaid debts has long been a challenge for both local and foreign contractors, with some owed billions of shillings for work completed as far back as 2016.
Hundreds of road construction projects, which had stalled due to unpaid debts, will resume following a breakthrough in securing the necessary funds.
The government has received Sh63 billion to settle outstanding bills with contractors, allowing work to continue on over 580 projects that had been put on hold for months.
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The issue of unpaid debts has long been a challenge for both local and foreign contractors, with some owed billions of shillings for work completed as far back as 2016.
The total debt stood at over Sh650 billion as of last year, prompting the contractors to halt their work in protest. Roads and Transport Cabinet Secretary Davis Chirchir confirmed on Friday that the government had received the funds to address this backlog.
Additionally, Sh10 billion is expected next week to fully clear the outstanding amounts owed to more than 270 contractors by July this year.
In a statement last week, Chirchir explained that the funds were part of a larger financial strategy.
"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," he said.
The government’s decision to clear the debt comes at a crucial time as the country grapples with a constrained fiscal space. Treasury’s focus on servicing the mounting national debt has left little room for other financial obligations, including payments to contractors.
The government’s debt settlement plan involves raising the required funds through a Sh175 billion bond that will be floated in the coming months.
The bond will target foreign markets for 80 per cent of the cash, with the remainder raised locally. The plan also includes a provision for contractors to write down up to 35 per cent of the interest on delayed payments, easing the pressure on the government while ensuring contractors return to work.
“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,” Chirchir said.
The bond will be arranged by the Trade Development Bank and Africa Exim Bank, both of which are playing leading roles in this initiative. The proceeds from the bond will go toward paying off the bridge facility that the government has received, ensuring that work on critical infrastructure projects can resume.
Under this plan, the government will pledge a portion of the Road Maintenance Levy Fund (RMLF), about 28 per cent for 10 years.
This will allow investors in the bond to receive returns based on these collections, offering a long-term solution for funding road projects.
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