Mudavadi Proposes Diaspora Bond to Finance JKIA Terminal Expansion

Prime Cabinet Secretary Musalia Mudavadi has unveiled a forward-looking strategy aimed at financing the construction of a new terminal at Jomo Kenyatta International Airport (JKIA).

This initiative follows the suspension of discussions with the Adani Group, which was initially tapped to enhance the airport through a public-private partnership (PPP). In a recent address during Diaspora Day 2024 at the Kenyatta International Conventions Center (KICC), the Foreign Affairs Cabinet Secretary proposed the issuance of a diaspora infrastructure bond to generate necessary funds for the airport’s upgrade.

Mudavadi reaffirms the government’s dedication to resolving the challenges posed by the ageing airport, which, according to Treasury Permanent Secretary Chris Kiptoo, demands over Sh260 billion for upgrades. Mudavadi emphasizes the potential contributions of Kenyans living abroad in financing this crucial project. Government analyses suggest that the infrastructure bond could raise upwards of Sh500 billion, exceeding the Sh300 billion required for the airport’s development if it is effectively structured and backed.

An infrastructure bond represents a government-issued debt security aimed at funding capital-intensive projects. Investors purchasing these bonds effectively lend money to the government, entitling them to periodic interest payments until maturity, when the principal is repaid. Earlier this year, the Central Bank of Kenya (CBK) initiated a Sh70 billion, 8.5-year amortized infrastructure bond intended to support various budgeted infrastructure projects for the 2023/24 financial year.

Despite the setback with the Adani Group, the government remains resolute in leveraging PPP models to finance important infrastructure developments across the nation. While specifics regarding the operational mechanics of the diaspora bond have not been disclosed, Mudavadi has reiterated the appeal of infrastructure bonds, particularly their tax-exempt status and attractive interest rates.