Mudavadi Pushes for Diaspora Bond to Revamp JKIA

Prime Cabinet Secretary Musalia Mudavadi has proposed involving the diaspora community in financing the construction of a new terminal at Jomo Kenyatta International Airport (JKIA).

According to the Foreign Affairs Cabinet Secretary, the government should opt to float a diaspora infrastructure bond to upgrade the JKIA. On Tuesday, the Head of State made it clear that the government will find a way to upgrade the airport after protests halted talks with the Adani Group.

To make the necessary upgrades to the aging airport, the government requires northwards of Ksh260 billion, according to Treasury Permanent Secretary Chris Kiptoo. However, Mudavadi now says that Kenyans living abroad could single-handedly pay for the necessary upgrades.

The government has been thrown into tailwinds since Ruto announced the cancellation of the Adani Group-led initiatives to upgrade JKIA under a PPP project last month.

While speaking during Diaspora Day 2024 at the Kenyatta International Conventions Center (KICC) on Wednesday, Mudavadi revealed that analysis from the government showed that an infrastructure bond could raise upwards of Ksh500 billion.

“If we package an infrastructure diaspora bond properly, well backed…the bond can raise more than the Ksh300 billion required,” he asserted.

He added, “Our initial figures show we could raise over Ksh500 billion. That means the diaspora can build that new airport.”

An infrastructure bond is a government-issued debt security specifically used to raise funds for infrastructure development projects that are typically capital-intensive.

The bond works like this, when you buy an infrastructure bond, you are essentially lending money to the government. In return, the government pays you interest periodically until the bond matures, at which point the principal (the amount you invested) is repaid.

The Central Bank of Kenya (CBK) in January this year floated a Ksh70 billion, 8.5-year amortised infrastructure bond earmarked for funding budgeted infrastructure projects in the 2023/24 financial year.

The government has remained defiant and says it is fully committed to adopting public-private partnership (PPP) models to finance the country’s mega infrastructure projects, despite the Adani debacle.

While Mudavadi did not offer any modernities as to how the bond would work, infrastructure bonds remain highly sought after since they are tax-free and ordinary and have good interest rates.