The government is deepening its market-based reforms by turning to securitised infrastructure bonds as a new financing model, signalling a strategic shift in how the country funds its development agenda.  

This approach, revealed in the June 2025 Nairobi Securities Exchange (NSE) monthly bulletin, comes at a time when fiscal pressures and a narrowing borrowing space are forcing the Treasury to rethink traditional funding models. 

The move is part of broader economic reforms announced alongside the 2025/26 Finance Bill, which avoids introducing new taxes and instead focuses on improving tax compliance, digital enforcement, and expanding the formal tax base.

These reforms are designed to manage a projected fiscal deficit of 4.5 per cent of gross domestic product (GDP) while supporting infrastructure expansion and economic growth. 

“Additionally, the Treasury is exploring the use of securitised infrastructure bonds as an alternative financing mechanism, aiming to boost domestic investor participation while reducing reliance on external borrowing,” the NSE monthly update for June 2025 noted, in a section highlighting key national economic developments.

A securitised infrastructure bond is a debt instrument backed by the future cash flows generated from a specific infrastructure project.

Unlike regular government bonds that are paid back from the national budget, these bonds are repaid using revenues from the projects themselves—such as tolls, electricity payments, or lease charges from public utilities.

The model is increasingly being used in emerging markets to attract private capital into public infrastructure without overburdening national debt. 

For instance, if the government builds a toll road and issues a bond to finance it, investors in the bond will be repaid using toll fees collected over time.  

This structure not only provides a predictable revenue stream for investors but also reduces the pressure on exchequer-funded repayments. It is seen as a win-win: the government gets the capital upfront, and investors get security in the form of a project-backed income stream. 

Treasury’s interest in this model reflects a broader policy shift toward market liberalisation and public-private partnerships. The move also aligns with ongoing plans to privatise several state-owned enterprises, including the much-anticipated IPO of Kenya Pipeline Company.  

These combined strategies are expected to deepen local capital markets, attract institutional investors such as pension funds and insurance firms, and reduce the country’s dependency on concessional and commercial foreign loans.