After dithering in the first year in office, the Jubilee government has finally started implementing big projects.
Among
the projects that have started is the standard gauge railway. The year
has closed with the start of compensation for way-leave in parts of
Coast.
About Sh8 billion has been set aside to be
given to people who will be displaced. The new railway is expected to
reach Nairobi by 2016.
Upgrade of Jomo Kenyatta
International Airport and airstrips in the country is ongoing. The plan
is aimed at providing wider space to travellers.
As the
year comes to an end, the government has been scouting for contractors
to undertake public-private partnership in tarmacking 10,000 kilometres
of roads.
“The projects have potential benefits to the
economy but most of these are not immediate for they will be felt in
three to five years when they are completed,” said Mr Gitau Githogo, an
economist.
It is expected that the start of the road
projects will further increase borrowing from commercial banks. However,
the projects will create jobs across the country.
The
alternative funding sources are expected to provide Sh260 billion for
the construction of the first 2,000 kilometres spread across the
country.
The ambitious infrastructure project, that is expected to create about 137,000 jobs in three years, was mooted in August.
The
roads project will be implemented through annuity financing. This means
contractors will access loans guaranteed by the government from banks,
enabling them to design, construct and maintain the roads.
The government is also expected to continue undertaking massive road construction works across the country.
Among
the key projects that the government is expected to undertake is the
expansion of Outer-Ring Road whose funds have been provided by the World
Bank. The other is the double-decker road running from JKIA to
Westlands and the expansion of Ngong Road.
Public-private model
Lappset
project that seeks to connect Kenya with South Sudan and Ethiopia is
expected to start from several fronts through public-private model. The
construction of Lamu port is, however, crucial among these projects.
“When
the projects kick off, there will be more money in circulation bringing
the possibility of increased inflation. On the good side there will be
mass employment,” said Mr John Mutua, programme officer incharge of
budget at the Institute of Economic Affairs.
Components
of Lappset project are Lamu port, roads, crude oil pipeline,
electricity network, two airports at Manda in Lamu and in Isiolo. Others
are an oil refinery and three resort cities.
The government hopes that private investors will participate in building these facilities through public-private partnerships.
Building
of Konza ICT city that was launched by former President Mwai Kibaki, is
expected to commence soon. This month, Deputy President William Ruto
launched the first phase of the city with a promise to create 17,000
direct jobs.
Galana/Kulalu irrigation project is expected to realise the first crop harvest from the 10,000 acres in February 2015.
The
government is expected to upscale the project from next year and
progressively cover the one million acres set aside under the plan.
The
Sh400 billion irrigation scheme has faced funding delays. However, an
Israeli firm, Agri Green signed a contract with the government to build
the “model farm” at a cost of $651 million (Sh55.3 billion).
When
completed, the project is projected to have 500,000 acres of land under
maize production, 200,000 acres under sugar cane farming, 150,000 acres
for beef and game animals, 50,000 acres under horticulture, 50,000
acres for dairy farming and the remaining 50,000 acres for growing
fruits.
The Ministry of Agriculture has said that many investors have shown interest in taking up part of the land for cultivation.
The
government signed a deal with Toyota Tsusho Corporation of Japan for
construction of Sh103 billion fertiliser plant in Eldoret, in September.
The construction is expected to start next year, with the first stock
of NPK fertiliser expected to roll out from the plant in 2016.
In
preparation for a rise in spending on infrastructure, the government
increased the ceiling of borrowing from Sh1.2 trillion to 2.5 trillion
last month.
Implementation of these projects is
expected to put pressure on the shilling with increased import of
equipment and other key inputs.
“The importation of
equipment for construction will increase demand for forex which will
pile pressure on the shilling, potentially weakening it,” Mr Mutua said.
The
government has already secured $750 million from International Monetary
Fund to cushion the economy against shocks that may come as a result of
increased demand for dollars as construction materials are imported.
National
Treasury Cabinet secretary, Mr Henry Rotich, said the expansion of the
debt ceiling would provide headroom for expanded external borrowing to
finance the Sh327 billion standard gauge railway, 10,000 kilometre road
annuity programme, the 5,000MW electricity plan and fund projects under
Lappset.
He said the government would seek massive
financing to meet the cost of the country’s infrastructure development
in the second medium term plan 2013-2017. The government raised more
than Sh160 billion in its maiden Eurobond during the year.
“The
National Treasury on behalf of the government seeks to tap the recently
issued sovereign bond for an amount not exceeding $750 million to
finance ongoing development projects.
Further, the
disbursements of the SGR loans are expected to accelerate having
satisfied the conditions precedent to disbursements and thereby paving
the way for implementation of the project,” Mr Rotich said.
Debt ceiling
He
said the funds, together with upcoming disbursements of cash for other
projects will drive the quantum of external debt beyond the current
Sh1.2 trillion ceiling.
The minister said debt ceiling
for external debt had been raised from $10 billion (Sh800 billion) to
$14 billion (Sh1.2 trillion).
By September 30, the
government had disbursed outstanding nominal external debt stock at
Sh1.045 trillion against the set statutory ceiling of Sh1.2 trillion.
This implies that the government had only Sh155 billion, an amount that would have starved projects of funds.
No comments:
Post a Comment