Kenya has taken a new step toward its long-term development goals after the Cabinet approved the establishment of a KSh 5 trillion National Infrastructure Fund, a central vehicle aimed at mobilizing private and public capital to finance ambitious modernization plans.
- •The Fund will be structured as a limited liability company designed to channel government resources and privatization proceeds into large-scale infrastructure projects, from roads and railways to dams and energy generation, according to a Cabinet dispatch on Monday.
- •The government projects that every shilling invested through the Fund could attract up to KSh 10 from pension funds, private equity, development finance institutions, and international sovereign partners.
- •Key projects that the Fund aims to catalyze include the construction of 50 mega-dams, 200 mini-dams, and over 1,000 micro-dams to expand irrigated farmland.
The proceeds will also be channeled into the dualing of 2,500 kilometers of highways and the tarmacking of 28,000 kilometers of roads. Additionally, the Fund will fuel the expansion of the Standard Gauge Railway (SGR) to Malaba and initiate the planned generation of 10,000 megawatts of electricity over the next seven years.
The oversight of the Fund will be handled by a competitively appointed board and CEO, with a governance framework designed to ensure transparency and accountability.
In November, the World Bank endorsed Kenya’s decision to establish the National Infrastructure Fund, highlighting its role in expanding the country’s road and rail network, irrigation systems, and energy generation. During a meeting at State House, World Bank Africa Executive Director Zarau Kibwe reaffirmed the lender's support for the country's social sector including education, health, social protection, and human capital development.
The National Infrastructure Fund will be paired with the newly approved Sovereign Wealth Fund, which will manage revenues from natural resources and a portion of privatization proceeds to enhance fiscal resilience and inter-generational savings. Together, the two funds are positioned as the financial backbone for Kenya’s ambition to become a high-income, industrialized economy.
The Budget Gap
According to government data, Kenya’s public debt hit KSh 12.06 trillion in September 2025, with domestic borrowing now accounting for 55% of the total, up from 52% a year earlier. While the shift toward local financing has lowered reliance on volatile external markets, it also highlights growing pressure on the domestic financial system to fund the government’s spending (a bulk of which caters for recurrent expenditure).
In the 2025/26 budget, Kenya’s ambitious development agenda has been scoffed at by the stark imbalance in the allocation of funds between recurrent and development expenditure. Total development expenditure in the national budget stands at KSh 693.2 billion.
Due to fiscal distress, the government shifted to relying on public-private partnerships (PPPs) to fund infrastructure development and repairs. The decision to involve private investment into public development plans has not operated smoothly due to the opacity of agreements and constitutional dead-ends. Last year, the government had to yield to public uproar against PPP deals involving two Adani Group companies, cancelling the planned refurbishment of the JKIA and over 380 kilometers of power transmission lines.
To alleviate the shrinking development bill, the government has supported creative financing methods such as the listing of the KSh 44.79 billion infrastructure bond geared to the construction of the Talanta Sports Stadium. The Kenya Roads Board (KRB) has also issued infrastructure bonds securitized by KSh 12 from the Road Maintenance Levy (RML).
These endeavors to maneuver the funding shortfall for development projects have been criticized for ignoring the wasteful expenditure of budgeted revenues. The National Infrastructure Fund is likely to face similar friction in its operation, especially because the planned divestiture of government shares in Safaricom and Kenya Pipeline (proceeds that are slated to be included in the fund) is facing resistance.
