State to cut debt by off loading large projects to private sector

National Treasury PS Chris Kiptoo before the National Assembly Special Funds Accounts Committee at Bunge Towers, Nairobi, on November 11, 2025. [Elvis Ogina, Standard]

The government plans to shift some costly infrastructure projects to the private sector to reduce pressure on the country’s debt obligations.

National Treasury Principal Secretary Chris Kiptoo said the government guaranteed loans for some infrastructure projects that could be profitable on their own since they are commercially viable.

The move is in line with President William Ruto’s direction to go the public-private partnership (PPP) way for commercially viable projects.

This is informed by the country’s coffers that can no longer sustain more debts for capital-intensive projects such as highways, dams and power generation.

While Kenya’s gross domestic product (GDP) stood at Sh16.2 trillion in 2024, according to the Kenya National Bureau of Statistics (KNBS) Economic Survey report, the country’s debt is inching closer to Sh13 trillion. 

Speaking during the signing of a Sh40.4 billion ($311 million) power transmission project between Kenya and Africa50, Dr Kiptoo noted the shrinking fiscal space and spending pressures against struggling revenue growth.

Africa50 is an infrastructure investment platform. “We have taken a deliberate decision to pursue fiscal consolidation. We will try to work on increasing revenue while also managing spending pressure to make sure we create efficiency and limit the amounts we have to borrow,” he said.

He said this is one of the reasons why all commercially viable projects are now moving to PPP. “And we know in our books, we have taken loans for projects that are profitable,” he said, adding that the Sh40.4 billion project between Africa50 and Kenya Electricity Transmission Company (Ketraco) was lined up for a loan as well.

“But the fact that we can do PPP is a sure way.” The PS, while referencing the energy sector, highlighted that it may be time to look into the loan book so that projects with commercial viability can be shifted to the private sector.

“I think we also have to look at the history of the books. Some of the projects that are financially sustainable will be taken off the loan book and make sure they are profitable,” he said. “We know the private sector delivers well.” Director General PPP Directorate Eng Kefa Seda said the fiscal gap in inthe frastructure sector is in both development and maintenance. “As it stands today, we have a funding gap of nearly Sh4 trillion; Sh3 trillion being for development of infrastructure and Sh1 trillion for maintenance,” he said.

The PPP Directorate is a new directorate under President Ruto administration, specifically for spearheading private sector viable projects.

Seda said the cardinal principle for the government to adopt PPP is to pursue development off the balance sheet.

“This Sh40.4 billion power transmission project is a privately initiated proposal, which means they took all the risk from a procurement perspective. Until we sign off, there is no exposure risk to the government,” he said.

The power transmission project will see the construction of two lines: 400 kV Lessos – Loosuk and 220kV Kibos - Kakamega - Musaga. Power Grid Corporation of India will be undertaking the project.

The two lines will help in the evacuation of power, hence reducing technical losses and blackouts in Western and North Rift regions.

Apart from the power transmission project, Kenya is also developing the Nakuru-Rironi-Mau Summit through PPP. The government is also pursuing geothermal power generation, Sabaki Water (to facilitate water supply to Malindi and Kilifi residents), Mzima Water (in Taita Taveta), Kenyatta National Hospital housing facilities and Moi Teaching and Referral Hospital accommodation through the same.