Kenya's National Infrastructure Fund has begun using its initial 340 billion shilling allocation, or about $2.62 billion at the rate quoted on 7 October, to buy public bonds on the domestic market. Its chief executive, James Mworia, presented the fund's deployment mechanism for the first time in an interview with Reuters.
The purchases began in July, but their cumulative amount has not been made public. The fund plans to invest its entire allocation by the end of the fiscal year in June 2027.
The scheme is to place the funds temporarily in government securities before allocating them to commercial projects in energy, transport, logistics, telecommunications, water and agriculture. This strategy is expected to generate income for the fund while its project portfolio is being built.
James Mworia expects annual returns of about 42 billion shillings from the bond portfolio. This estimate represents a target set by the fund manager rather than an observed result, since the fund has not published the value of the securities already acquired or their average yield.
The government capitalised the vehicle with proceeds from the privatisation of Kenya Pipeline Company and the sale of part of its shares in Safaricom. Ultimately, the fund aims to mobilise 3,600 billion shillings over ten years through co-investment and debt.
The 340 billion shillings represent about a third of Kenya's domestic borrowing target for the financial year ending June 2027, according to James Mworia. By buying back bonds held in particular by banks, the fund hopes to free up liquidity that could be lent to businesses and households.
This effect will depend on banks' decisions and does not constitute a credit obligation to the private sector. Lenders may keep their liquidity or reinvest it in other government securities, while the fund itself remains exposed to sovereign risk during the bond phase.
The fund is considering, among other things, a stake in the refinery that the Dangote group is developing in the coastal county of Lamu. No amount has been disclosed. The law creating the National Infrastructure Fund was enacted in March to attract private capital into infrastructure while limiting direct recourse to the budget and public debt.