Introduction: A KES 5 Trillion Strategic Framework for National Transformation

The National Infrastructure Fund Bill, 2025 establishes a decisive realignment of Kenya’s fiscal and development model. It advances a transition from debt-intensive public financing toward structured asset monetization and disciplined private capital mobilization. Following Cabinet approval in December 2025 and formal introduction in early 2026, the Bill sets out the legal and institutional framework for a KES 5 trillion transformation program designed to close Kenya’s infrastructure gap over the next decade.

The legislation responds to a pressing macroeconomic context. Kenya faces an estimated annual infrastructure financing gap of USD 4–5 billion, equivalent to approximately KES 580–725 billion, alongside a public debt portfolio that stood at KES 11.5 trillion by mid-2025. The proposed Fund will operate as a Limited Liability Company, structured to attract long-term institutional capital including pension funds, development finance institutions, and sovereign partners. Through a targeted leverage ratio of 1:10, each KES 1 in public seed capital is expected to catalyze KES 10 in private investment, significantly amplifying the national development envelope without expanding sovereign debt exposure.

Strategic Investment Targets

The Bill sets out clear sectoral priorities to be financed through this vehicle, anchoring capital deployment in high-impact infrastructure that strengthens productivity, enhances competitiveness, and accelerates inclusive economic growth.

Strategic Investment Targets

Sector	Primary Physical Targets	Estimated Investment
Transport	Dualling 2,500 km of highways; tarmacking 28,000 km of roads; SGR extension to Malaba.	KES 1.5 trillion
Water	Construction of 1,250 dams (50 mega, 200 mini, 1,000 micro) to irrigate 2.5 million acres.	KES 1.5 trillion
Energy	Increase generation capacity by 10,000 MW from the current 2,300 MW by 2032.	KES 1.0 trillion

 

Capitalization and Governance

The Fund’s initial capitalization will be anchored in the strategic monetization of mature public assets. Targeted divestments of select state holdings, including stakes in Safaricom and the Kenya Pipeline Company KPC, are projected to generate approximately KES 347.5 billion, equivalent to USD 2.7 billion, in immediate seed capital. The Bill establishes a strict ring fencing mechanism to ensure that all proceeds are channeled directly into high impact, revenue generating infrastructure assets, strengthening capital discipline and safeguarding against diversion into recurrent expenditure.

Through a transparent governance structure and professional fund management model, the National Infrastructure Fund Bill, 2025 positions Kenya to mobilize long term private capital at scale. The framework is designed to reduce dependency on sovereign borrowing while advancing commercially viable, self sustaining infrastructure development that supports industrial expansion, competitiveness, and sustained economic transformation.

Institutional Framework and Governance Structure

The National Infrastructure Fund Bill, 2025 establishes a governance architecture calibrated to international sovereign investment standards while remaining anchored in Kenya’s constitutional public finance principles. The objective is clear: create a professionally managed capital platform capable of mobilizing large scale private investment without exposing the State to unsustainable fiscal risk. The Fund is structured as a Limited Liability Company wholly owned by the Government of Kenya, operating under corporate law disciplines, fiduciary obligations, and enforceable performance metrics. This design separates policy direction from capital deployment, allowing development priorities to be pursued through commercially sound investment decisions rather than budgetary allocations.

The architecture reflects a deliberate shift in statecraft. Infrastructure financing transitions from direct sovereign borrowing toward structured capital stacking, blended finance models, and disciplined portfolio management. Governance safeguards are embedded at every layer to ensure that the Fund operates with transparency, predictable rules, and institutional continuity across political cycles. By integrating board independence, executive professionalism, audit rigor, and statutory oversight, the framework aims to inspire confidence among domestic pension funds, global infrastructure investors, and development finance institutions seeking stable long-term returns.

National Infrastructure Fund Board

The Board is constituted as the apex decision-making authority responsible for strategy formulation, capital allocation policy, enterprise risk governance, and long-horizon portfolio performance. Its mandate extends beyond oversight into stewardship of a multi-trillion-shilling balance sheet, requiring technical sophistication and fiduciary discipline. The Board sets sector concentration limits, approves investment pipelines, determines dividend retention policy, and monitors leverage ratios to maintain solvency and creditworthiness.

• Chairperson

The Chairperson provides strategic leadership and governance direction. Drawn from senior ranks of capital markets, infrastructure finance, or institutional investment management, the Chair ensures that board deliberations remain anchored in financial prudence and long-term value creation. The role includes oversight of board committees, facilitation of strategic planning retreats, and enforcement of ethical standards. The Chair also acts as the principal interface between sovereign shareholder interests and the Fund’s commercial objectives.

• Ex Officio Members

The Cabinet Secretary for the National Treasury and the Principal Secretary responsible for Infrastructure participate to align fiscal policy, national development plans, and the Fund’s investment trajectory. Their presence ensures macroeconomic coherence, including debt sustainability considerations, public-private partnership frameworks, and national infrastructure sequencing. They do not manage transactions directly but provide policy clarity that strengthens investor certainty.

• Independent Directors

Four directors are competitively recruited through a transparent process and must demonstrate at least 15 years of senior leadership in private equity, project finance structuring, infrastructure asset management, or sovereign wealth fund governance. These directors interrogate financial models, validate internal rate of return projections, assess demand risk assumptions, and challenge capital structuring proposals. Their independence safeguards the Fund against concentration of influence and reinforces investor-grade governance credibility.

• Institutional Investor Representatives

Two directors represent domestic institutional capital pools such as pension funds. Their inclusion embeds a long-term investor perspective within board deliberations, ensuring that infrastructure investments align with liability matching requirements and prudent risk diversification principles. They also strengthen trust among domestic savers whose capital may participate in the Fund’s financing structures.

The Board operates through specialized sub-committees covering audit and risk, investment approvals, governance and remuneration, and strategy. This layered structure enhances scrutiny, improves technical depth, and distributes oversight responsibilities efficiently.

Executive and Investment Management

Operational authority is vested in a professional executive team accountable to the Board through measurable financial and operational targets. Recruitment is market-based and performance-linked, enabling the Fund to attract expertise in infrastructure structuring, blended finance negotiation, asset lifecycle management, and cross-border capital mobilization. This professionalization is central to positioning the Fund as a credible counterpart to global investors.

• Chief Executive Officer

The CEO functions as the Fund’s accounting officer and chief investment strategist. Responsibilities include developing multi-year capital deployment plans, negotiating concession agreements, structuring syndicated financing arrangements, and maintaining investor relations. The CEO is also responsible for enterprise-wide risk management, compliance systems, and liquidity oversight. Performance is assessed against defined benchmarks such as portfolio return targets, capital mobilization ratios, and project implementation milestones.

• Investment Committee

This technical body conducts structured due diligence prior to capital commitment. It evaluates project bankability, revenue predictability, regulatory stability, foreign exchange exposure, environmental and social compliance, and long-term maintenance obligations. The requirement for formal certification of commercial viability creates a disciplined investment gate, ensuring that each approved project meets predefined financial sustainability thresholds before funds are deployed.

• External Fund Managers

The Fund may appoint reputable domestic or international managers to oversee sector-specific or geographically complex portfolios. This allows specialization in areas such as energy transition assets, logistics corridors, or water infrastructure. External managers operate under strict mandates with performance reporting obligations, fee transparency requirements, and clawback provisions to align incentives with long-term asset performance.

Accountability, Transparency, and Constitutional Compliance

The governance framework integrates multilayered oversight to maintain public confidence and investor trust. Transparency is embedded through structured disclosure requirements, independent audits, and legislative review mechanisms.

• Quarterly Reporting

Comprehensive reports are published every three months outlining portfolio performance, capital deployment status, risk exposures, management fees, and project milestones. These disclosures promote market transparency and allow stakeholders to assess the Fund’s financial health.

• Dual Audit Framework

An independent global audit firm conducts annual financial and operational audits, complemented by statutory review from the Auditor-General. This dual structure integrates market discipline with constitutional oversight, strengthening credibility in domestic and international capital markets.

• Parliamentary Scrutiny

The National Treasury submits the Fund’s annual investment plan to the National Assembly’s Committee on Finance and National Planning. Legislative review ensures policy alignment and accountability while preserving operational independence.

Risk Governance and Capital Protection

Robust safeguards are incorporated to preserve solvency, protect investor capital, and ensure long-term sustainability.

• Investment Restrictions

The Fund is barred from speculative derivatives, unsecured lending to state-owned enterprises, and high-volatility instruments that undermine capital preservation.

• Leverage Controls

A statutory cap on the Fund’s debt-to-equity ratio prevents excessive borrowing and systemic exposure, reinforcing balance sheet stability.

• Revenue Retention Mechanism

All revenues generated by toll roads, rail tariffs, or other funded assets are retained within the Fund to compound capital and expand reinvestment capacity. This reinvestment cycle strengthens asset growth and enhances financial resilience over time.

Through this comprehensive institutional design, the National Infrastructure Fund is positioned as a disciplined national investment platform capable of mobilizing private capital at scale while safeguarding public resources and reinforcing long-term economic transformation.

Strategic Priority Sectors and Project Pipeline

The National Infrastructure Fund Bill, 2025 defines a structured investment pipeline anchored in sectors with measurable economic multipliers, predictable revenue models, and long-term asset durability. The Fund is mandated to concentrate capital in commercially viable infrastructure capable of generating stable cash flows to service investor obligations while compounding national asset value. This approach ensures that infrastructure development transitions from fiscal expenditure to balance sheet expansion.

Sector prioritization is guided by three core principles: catalytic impact on national productivity, bankability under structured finance models, and scalability across regions. The pipeline reflects projects that strengthen Kenya’s position as a regional logistics hub, deepen industrial capacity, enhance climate resilience, and expand digital competitiveness. Each sector allocation is designed to reinforce economic integration, improve factor mobility, and unlock private sector participation at scale.

1. Transport and Logistics

Transport infrastructure is positioned as the backbone of regional trade integration and domestic market efficiency. Investments in this sector are structured to reduce transit costs, shorten delivery timelines, and increase corridor throughput capacity, thereby strengthening Kenya’s competitive advantage within the East African region.

• Standard Gauge Railway Extension

Capital deployment is targeted toward completion of Phase 2B from Naivasha to Kisumu and Phase 2C from Kisumu to Malaba. This extension is structured to unlock seamless freight connectivity to Uganda and the broader hinterland, reducing reliance on road haulage and improving cargo velocity. Revenue models include freight tariffs, bulk cargo contracts, and long-term concession arrangements designed to ensure predictable cash flows.

• Highway Modernization and Corridor Upgrading

The dualling of 2,500 km along the Northern Corridor, including strategic segments such as Nairobi–Mau Summit and Rironi–Mau Summit, is structured through Public-Private Partnership frameworks. Toll-based concession models, performance-linked maintenance contracts, and phased capital recovery mechanisms provide financial sustainability while expanding traffic capacity and improving road safety.

• rban Mobility Systems

Investment in the Nairobi Railway City redevelopment and Bus Rapid Transit Lines 2 and 3 addresses congestion constraints in the capital. These projects enhance commuter efficiency, reduce fuel wastage, and support transit-oriented development. Revenue streams include fare systems, commercial real estate integration, and advertising concessions embedded within transport nodes.

Transport investments are sequenced to generate both direct revenue and secondary economic spillovers across trade, tourism, and manufacturing.

2. Energy and Petroleum Infrastructure

Energy infrastructure underpins industrial expansion and manufacturing competitiveness. The Fund prioritizes scalable, revenue-generating energy assets with long-term power purchase agreements and regulated tariff frameworks to ensure income stability.

• Generation Capacity Expansion

The target to add 10,000 MW to the national grid by 2032 focuses on geothermal, wind, and solar capacity expansion. These projects leverage Kenya’s comparative advantage in renewable resources while attracting climate-aligned capital. Structured financing incorporates long-term off-take agreements, carbon credit mechanisms, and blended finance structures that mitigate currency and demand risk.

• Transmission and Distribution Strengthening

Grid modernization and regional interconnections improve system reliability, reduce technical losses, and enhance cross-border power trade. Strengthened transmission capacity increases asset utilization and revenue efficiency.

• Pipeline and Petroleum Logistics Upgrades

Expansion and modernization of the oil pipeline network enhance fuel distribution efficiency domestically and to neighboring landlocked economies. Tariff-based throughput models provide predictable revenue streams while reducing transportation bottlenecks.

Energy investments are structured to deliver stable annuity-like returns while strengthening national energy security.

3. Water Security and Agricultural Infrastructure

Climate resilience and food security are treated as macroeconomic priorities within the investment framework. Water infrastructure is positioned as a productivity multiplier capable of stabilizing agricultural output and reducing climate vulnerability.

• National Dam Development Plan

Financing for 1,250 dams, including 50 mega-dams, 200 mini-dams, and 1,000 micro-dams, expands water storage capacity, supports irrigation, and enhances flood mitigation. Revenue models incorporate irrigation fees, water supply tariffs, and potential hydropower generation where feasible.

• Irrigation Expansion and Agricultural Modernization

Bringing an additional 2.5 million acres under irrigation supports year-round cultivation, improves crop yields, and strengthens export-oriented agriculture. This investment stabilizes rural incomes and enhances food supply chains, contributing to inflation management and export diversification.

Water assets are structured for long-term sustainability, with integrated environmental safeguards and maintenance frameworks embedded in project design.

4. Digital and Industrial Infrastructure

Digital connectivity and industrial zones are treated as foundational enablers of knowledge-based growth and manufacturing expansion. The Fund is empowered to invest in enabling infrastructure that attracts private enterprises and foreign direct investment.

• Special Economic Zones Development

Infrastructure support for SEZs in Dongo Kundu, Naivasha, and Konza Technopolis includes power, water, internal roads, logistics facilities, and ready-to-occupy industrial platforms. Lease-based revenue models and long-term industrial tenancy agreements ensure steady cash flows while stimulating export manufacturing.

• National Digital Backbone Expansion

Expansion of fiber optic networks to sub-county levels enhances broadband penetration, supports e-commerce growth, and strengthens digital public services. Structured leasing of bandwidth and wholesale access agreements generate recurring revenue while bridging the digital divide.

Digital and industrial infrastructure investments are structured to amplify productivity gains across sectors.

Project Selection and Investment Screening

All proposed projects undergo rigorous technical and financial appraisal before capital commitment. The Investment Committee applies standardized evaluation criteria to ensure alignment with the Fund’s commercial mandate and national development objectives.

1. Economic Internal Rate of Return

Assessment of the project’s contribution to GDP growth, employment generation, supply chain efficiency, and regional integration. Projects must demonstrate measurable macroeconomic multiplier effects.

1. Financial Viability and Revenue Security

Evaluation of projected cash flows, tariff structures, demand forecasts, operating cost coverage, and investor return thresholds. Sensitivity analyses assess resilience under varying economic conditions.

1. Environmental and Climate Alignment

Screening against national climate commitments, environmental impact standards, and long-term sustainability benchmarks to ensure resilience and responsible development.

1. Risk Allocation and Mitigation Structure

Detailed analysis of construction risk, operational risk, currency exposure, and regulatory stability, alongside clearly defined mitigation strategies embedded within contractual frameworks.

Through this structured prioritization and disciplined appraisal process, the Fund aims to deploy capital into assets that generate durable economic returns while reinforcing Kenya’s long-term infrastructure capacity and fiscal stability.

Financial Provisions and Privatization Linkage

The financial architecture of the National Infrastructure Fund Bill, 2025 sets out the capital mobilization mechanics that will anchor the Fund’s launch and long-term sustainability. The framework establishes a structured linkage between asset monetization and infrastructure capitalization, enabling the State to unlock embedded value in mature public enterprises and redeploy that capital into growth-enhancing national assets. The design is deliberate: transform static holdings into productive infrastructure equity without expanding the sovereign debt stock.

This section also aligns the Fund operationally with the Privatization Act, 2025, creating a legally integrated pipeline through which divestiture proceeds flow directly into structured infrastructure investment. The model reflects a balance-sheet optimization strategy, where non-core or partially monetized state assets are converted into catalytic capital for revenue-generating infrastructure.

1. Privatization Pipeline and Capital Mobilization

The Bill authorizes the National Treasury to channel proceeds from the privatization of 65 state-owned enterprises into the National Infrastructure Fund. This creates a direct fiscal bridge between divestiture and development financing.

• Target Revenue Envelope

The initial phase of asset monetization is projected to generate approximately KES 347.5 billion, equivalent to USD 2.7 billion. This capital forms the foundational equity base that will support leverage mobilization under the Fund’s blended finance structure.

• Priority Divestiture Entities

Strategic share sales are expected from high-value enterprises including the Kenya Pipeline Company, with an anticipated contribution approaching KES 100 billion, alongside partial stake adjustments in Safaricom and East Africa Portland Cement Company. These transactions are structured to preserve operational continuity while unlocking capital value.

• Capital Allocation Framework

Approximately 90 percent of privatization proceeds are directed to the National Infrastructure Fund to strengthen infrastructure capitalization. The remaining 10 percent is allocated to the Sovereign Wealth Fund to secure intergenerational savings and long-term fiscal resilience. This dual allocation model balances immediate development financing with future wealth preservation.

The privatization linkage establishes a disciplined conversion of equity value into infrastructure assets capable of generating sustained national returns.

2. Ring-Fencing Mechanisms and Capital Protection

To safeguard integrity and prevent diversion into recurrent expenditure, the Bill embeds strict capital protection mechanisms designed to preserve investor confidence and fiscal discipline.

• Dedicated Infrastructure Holding Account

All privatization proceeds are deposited into a designated Infrastructure Holding Account at the Central Bank of Kenya. This structural separation ensures traceability and protects funds from commingling with general exchequer resources.

• Restricted Withdrawal Authority

Capital disbursement is limited strictly to projects approved within the National Infrastructure Plan. Withdrawals require formal authorization procedures and documentation of project viability.

• Independent Verification and Audit Trail

The Privatization Authority and the Auditor-General are mandated to verify transaction records and confirm that proceeds are fully reflected within the Fund’s investment portfolio. This creates a continuous audit trail from asset sale to infrastructure deployment.

These safeguards reinforce the Fund’s credibility among domestic and international investors by demonstrating capital discipline and transparency.

3. Revenue Generation and Self-Sustaining Model

The Fund is structured to operate as a revenue-generating investment platform rather than a grant-based financing vehicle. Infrastructure assets financed under the Fund are expected to generate predictable cash flows that service investor obligations and expand the capital base.

• Toll-Based Highway Concessions

Dualled highways developed under PPP frameworks will incorporate toll systems calibrated to recover construction, maintenance, and financing costs. Concession agreements define revenue-sharing models and performance standards to ensure long-term asset sustainability.

• Tariff and Off-Take Agreements

Energy and water infrastructure projects will be supported by long-term power purchase agreements, supply contracts, or regulated tariff structures with utilities such as Kenya Power. These contractual frameworks secure stable income streams and reduce demand volatility risk.

• Concession and Lease Revenues

Port terminals, logistics facilities, airport infrastructure, and industrial zones financed by the Fund may be leased to private operators under concession agreements. Lease fees and service charges generate recurring income that strengthens portfolio resilience.

The user-pay model embeds commercial sustainability while maintaining public benefit.

4. Transitional Provisions and Implementation Continuity

To ensure operational stability, the Bill incorporates transitional arrangements that align legacy commitments with the new Fund structure.

• Settlement of Verified Pending Bills

A portion of the initial capitalization may be deployed to settle verified pending obligations in the roads and water sectors, estimated at over KES 150 billion. Clearing these liabilities unlocks stalled projects, restores contractor confidence, and stabilizes sector liquidity.

• Integration of Existing PPP Contracts

Infrastructure agreements executed under the prior PPP framework will transition into the Fund’s oversight structure. This preserves contractual continuity, protects investor rights, and ensures seamless project progression without legal disruption.

• Phased Operationalization

The Fund’s capitalization, project onboarding, and governance activation are sequenced to allow structured scaling while maintaining risk controls.

Conclusion

The National Infrastructure Fund Bill, 2025 introduces a structural evolution in Kenya’s public finance architecture. By monetizing mature state assets and channeling proceeds into revenue-generating infrastructure, the legislation seeks to deliver a KES 5 trillion development ambition within a fiscally disciplined framework. The blended capital model, supported by institutional safeguards and structured governance, positions the Fund as a long-term national investment platform capable of attracting domestic and global capital at scale.

The Bill is presently undergoing Public Participation. Following review of stakeholder submissions, the National Assembly is expected to proceed to final consideration and vote by late March 2026, marking a pivotal step toward operationalization of the Fund.