Kenya has taken a major step toward changing how it finances large development projects after President William Ruto signed the National Infrastructure Fund Bill into law on Monday.
The new law introduces the National Infrastructure Fund (NIF), a financial tool that the government hopes will help support major infrastructure projects without relying heavily on loans or increasing taxes.
The President described the creation of the fund as one of the most important steps in Kenya’s development journey.
The move follows plans he outlined during his 2025 State of the Nation address, where he spoke about transforming the country into a developed economy similar to nations such as Singapore, Japan, South Korea and Malaysia.
The government estimates that the projects needed to achieve this transformation could cost more than Ksh. 5 trillion.
According to the President, these projects will mainly focus on education, transport, energy and water irrigation. Instead of borrowing large amounts of money from international lenders or raising taxes, the government plans to mobilize funds through the new National Infrastructure Fund and a proposed Sovereign Wealth Fund.
This approach represents a shift from the traditional way Kenya has financed infrastructure in the past.
For many years, large projects such as highways, railways and energy plants have been funded through loans from foreign lenders or through domestic borrowing.
While these loans helped build critical infrastructure, they also increased the country’s public debt and raised concerns about the sustainability of future borrowing.
The National Infrastructure Fund is designed to mobilize long-term investment specifically for infrastructure. In many countries, similar funds operate as part of a broader Sovereign Wealth Fund system.
These funds usually invest government-generated revenue, including earnings from natural resources or proceeds from privatization of state assets, to support development projects and build long-term national wealth.
Kenya plans to seed the fund using revenue earned from natural resources as well as money raised through the sale or privatization of certain public assets.
The aim is to create a pool of capital that can finance large projects while also attracting private investors and international partners.
One of the main advantages of such a fund is its ability to support “blended finance.” This means public money can be used to reduce the risks of large projects and encourage private investors, pension funds and development banks to participate.
Infrastructure projects often require huge upfront costs and take many years to generate returns, which can discourage private investors if government support is not available.
Another reason Kenya is exploring this approach is the country’s current financial position. Kenya’s credit ratings remain relatively low compared to developed economies, which makes borrowing from global markets more expensive. Rising debt repayment costs have also increased pressure on government finances.
Economic analysts say a well-managed infrastructure fund could help reduce reliance on borrowing in the long term. By investing strategically and partnering with private investors, the fund could provide a more stable way to finance development while easing the burden on taxpayers.
However, experts warn that the success of the National Infrastructure Fund will depend heavily on strong governance, transparency and professional management.
Political interference, poor fiscal discipline or weak oversight could undermine the goals of the fund and reduce investor confidence.
If properly managed, the fund could help Kenya undertake ambitious projects planned for the next decade. These include expanding the road network, extending the Standard Gauge Railway from Naivasha to Kisumu and eventually Malaba, and building dozens of large dams to support irrigation and improve water supply.
The government hopes that by using the National Infrastructure Fund together with a future Sovereign Wealth Fund, Kenya will be able to finance major infrastructure projects more sustainably while laying the foundation for long-term economic growth.
