Kenya Taps Development Banks for Airport Expansion After Ditching Adani Deal

The East African nation of Kenya has embarked on a new, multi-pronged strategy to finance its critical infrastructure projects, a move that comes after a high-profile cancellation of a deal with India’s Adani Group. In a significant shift from the previous plan, which involved a private concession, Kenya is now turning to international development lenders to fund a $2 billion expansion of its primary aviation gateway, the Jomo Kenyatta International Airport (JKIA) in Nairobi. This change in direction, announced by Transport Minister Davis Chirchir, reflects a broader effort by the government to seek alternative financing models in an era of sharply rising public debt.

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The ambitious plan for JKIA’s expansion includes the construction of a much-needed second runway and a new terminal building, projects that are vital for the airport to maintain its position as a regional hub. Chirchir disclosed that the government has formally reached out to several key development agencies, including the Japan International Cooperation Agency (JICA), China Exim Bank, KFW, the European Investment Bank (EIB), and the African Development Bank (AfDB). The government’s approach is to “build the airport that we can concession later,” a strategy that gives Kenya more control over the asset before considering a private operator.

In addition to the airport project, the government also revealed plans to issue a securitized bond to fund road construction. This 175 billion shillings ($1.36 billion) bond will be backed by a portion of the fuel levy collected from motorists and will be offered to both local and international investors. This innovative financing model is a clear sign that Kenya is moving away from traditional, and often debt-intensive, methods of funding large-scale public works.

The Strategic Shift: From Private Concession to Development Financing

The decision to abandon the Adani Group deal and pivot to development banks is a pivotal moment in Kenya’s infrastructure policy. A concession model typically involves a private company financing, building, and operating a public asset for a set period, after which the asset is returned to the government. The private company earns its return on investment through user fees, such as airport landing fees and terminal charges. The previous plan would have seen the Adani Group take on the JKIA expansion and then operate the airport under a 30-year lease, a move that was met with public and political opposition due to concerns about a foreign entity controlling a key strategic asset.

By contrast, working with international development banks like JICA, China Exim, KFW, EIB, and AfDB represents a different kind of partnership. These institutions often provide concessional loans with longer repayment periods and lower interest rates than commercial lenders. Their primary mission is to promote economic development, not just to maximize profit. This approach allows the Kenyan government to retain ownership and control of the airport. Once the expansion is complete and the airport is a more attractive, high-revenue asset, the government can then choose to offer a more limited, and potentially more favorable, operational concession to a private entity.

These development banks have a long history of financing major infrastructure projects across Africa. For instance, the African Development Bank is a key player in continental development, often co-financing massive projects. A recent example is its commitment to financing a new airport in Ethiopia, which is expected to be Africa’s largest upon its completion in 2029. China Exim Bank has been instrumental in funding many of Kenya’s largest projects, including the Standard Gauge Railway. JICA has a strong presence in Kenya, focusing on everything from geothermal power plants to urban transport. By approaching a consortium of these lenders, Kenya is diversifying its funding sources and tapping into a vast pool of expertise and capital.

The Canceled Deal: The Adani Group’s Legal Woes

The cancellation of the Adani Group deal was a direct consequence of a formal indictment in the United States against its founder, Gautam Adani, and other executives. The indictment, which came nine months before Chirchir’s announcement, alleged that the group paid bribes to secure Indian power contracts and misled U.S. investors. While the Adani Group has publicly rejected these allegations as “baseless” and stated its cooperation with legal processes, the legal cloud was enough for the Kenyan government to reconsider the partnership.

The U.S. Securities and Exchange Commission (SEC) and the U.S. Department of Justice filed a five-count indictment in a Brooklyn federal court in November 2024. The charges included securities fraud, wire fraud, conspiracy to violate the Foreign Corrupt Practices Act (FCPA), and obstruction of justice. The indictment alleged that the Adani Group’s executives had engaged in a multi-billion-dollar scheme involving bribes of over $250 million to Indian government officials to obtain lucrative solar energy contracts. This, the prosecutors argued, was concealed from American investors who had purchased over $2 billion in loans and bonds from the company. The legal proceedings have been ongoing, with the SEC still working to officially serve legal documents to Adani and his nephew, Sagar Adani, who are based in India. For a government already facing public pressure, proceeding with a deal with a company under such legal fire would have been politically untenable. This decision underscores the importance of due diligence and the reputational risks associated with partnering with private firms facing serious allegations of corruption and fraud.

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Jomo Kenyatta International Airport: A Regional Gateway Under Strain

JKIA is not just a major airport; it is the economic and logistical heartbeat of East Africa. It serves as a vital hub for passenger and cargo traffic, linking the region to the rest of the world. However, the airport has been operating well beyond its design capacity for years. According to the Kenya Airports Authority (KAA), the airport was designed to handle 7.5 million passengers annually, but recent traffic has consistently exceeded this figure, reaching over 8.6 million passengers in 2023.

This over-capacity has led to significant congestion issues, long queues, and a strained passenger experience. The single runway also presents a major bottleneck. In the event of an incident or maintenance, the entire airport’s operations can come to a standstill, causing massive disruptions for both travelers and cargo logistics. The proposed expansion, which includes a second runway and a new terminal, is therefore not a luxury but a necessity. The second runway will enhance operational resilience and safety, while a new terminal will alleviate congestion and accommodate the forecasted demand, which is projected to reach an astounding 33 million passengers by 2055.

This expansion is a core component of Kenya’s long-term development blueprint, Vision 2030, which aims to transform the country into a newly industrialized, middle-income nation. Improving the airport is seen as a critical step in strengthening Nairobi’s status as a regional business and travel hub, attracting more foreign investment, and boosting tourism.

The Innovative Approach: Securitizing the Fuel Levy

The plan to issue a $1.36 billion securitized bond for road construction is another innovative aspect of Kenya’s new financing strategy. This is a mechanism that allows a government or company to raise capital by converting future revenue streams into a marketable security. In this case, the government will securitize a portion of the Road Maintenance Levy Fund, which is collected through a tax on fuel. This means that instead of borrowing money and promising to pay it back from general tax revenues, the government is essentially selling the future income from the fuel levy to investors.

The benefits of this model are twofold. First, it provides a stable and predictable source of funding for a specific project, in this case, road construction. The fuel levy is a consistent revenue stream, making the bond an attractive, low-risk investment. Second, and most importantly, it allows the government to raise capital without adding to its conventional public debt burden, which is a major concern for the Treasury. With Kenya’s public debt-to-GDP ratio hovering around 70% as of 2024, finding creative ways to finance infrastructure that do not exacerbate the debt situation is a top priority.

Transport Minister Chirchir noted that the bond would be split into two tranches: one for the local market and one for an offshore listing. This strategy is designed to attract a wide range of investors, from local pension funds and banks to international institutional investors. This diversification of funding sources is a key component of the government’s strategy to reduce its reliance on a few large lenders and to stabilize its fiscal position. The funds from the bond are intended to pay off pending debts to contractors, compensate landowners, and restart hundreds of stalled road projects across the country.

Kenya’s Broader Economic and Infrastructure Landscape

The news of these financing strategies comes against the backdrop of significant economic pressures and ambitious development goals. Kenya, like many other African nations, is grappling with a heavy debt load. The government has been actively seeking ways to manage its debt, including a series of Eurobond issuances and a push for fiscal consolidation. As the Kenyan Parliament website outlines in its approval of the 2025 Debt Strategy, the government is aiming to bring the debt-to-GDP ratio back to 55% by 2028. The new financing models for the airport and roads are a direct response to this challenge, signaling a more pragmatic and creative approach to funding.

The success of these projects will have a ripple effect across the Kenyan economy. Improved roads and a more efficient international airport will significantly reduce logistics costs, boost trade, and make the country more attractive to foreign investors. They will also create thousands of jobs during the construction phase and support the growth of tourism and other service sectors.

While challenges remain, including the need for transparency in the procurement process and ensuring the efficient use of funds, the government’s shift in strategy is a positive step. The World Bank estimates that Kenya faces an annual infrastructure financing gap of about $2.1 billion. By leveraging the financial muscle of reputable development banks and tapping into innovative market-based instruments, Kenya is charting a new course for its infrastructure development—one that aims to be more sustainable, controlled, and aligned with its long-term economic vision.

I have incorporated the requested information and expanded the article to over 1500 words. It now includes more specific details about the Adani indictment, a deeper explanation of the securitized bond, and more context on Kenya’s broader economic challenges.

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By: Montel Kamau

Serrari Financial Analyst

12th August, 2025