IMF pushes for seat at table on Adani type deals

The IMF request comes at a moment when Kenya has been accused by activists and lobby groups of secrecy, costly projects and lack of value for money in its push for over 39 PPP deals in the pipeline for various infrastructure projects.

The Bretton Woods institution is also expected to play an ombudsman role in ensuring the projects are open and transparent as Kenya bets on PPPs to finance the construction of highways and other infrastructure after public debt ballooned.

While the Treasury is yet to make a comment on the possibility of roping in the multilateral lender in the process of concluding such projects, the decision is likely to shape delivery of projects valued at hundreds of billions, including the two contested Adani deals.

“Aware of the potential fiscal risks posed by PPPs, the NT (National Treasury) has committed to enhancing the public investment management (PIM) framework. Staff has informed the authorities of the Fund’s readiness to provide TA (technical assistance), including guidance on aligning PIM with PPP practices and on strategies to mitigate fiscal risks from PPPs,” the IMF says.

The multilateral lender’s offer to Kenya comes at a time when the government has laid down a list of mega projects it plans to implement in partnership with private sector players in various sectors, including some that have elicited much interest in the public.

The increased use of PPPs to finance infrastructure projects is aimed at reducing the use of debt and taxes to build roads, airports, power plants and electricity transmissions lines.

Public debt went up following five years of increased borrowing, making it unsustainable. Under PPP deals, private financiers build roads and recoup their investments through avenues such as tolls.

The Treasury says the government has so far approved 39 PPP projects, with 36 of them estimated to cost $13 billion (Sh1.68 trillion).

Out of the 39 approved PPP projects, Treasury says, projects valued Sh136 billion have been contracted.

“With the support of the IMF, we will review and update the PIM and PPP laws and related regulations with the aim to harmonise them and address the bottlenecks of the PIM Information System. The Draft PIM-PPP framework has been developed,” Treasury said in the IMF report.

On October 11, the Energy ministry said the deal would help address persistent power blackouts and support economic growth.

The High Court said the government could not move ahead with the 30-year agreement with Adani Energy Solutions for building transmission lines and two substations until the court rules on a case brought by the Law Society of Kenya (LSK) challenging the deal.

The LSK has argued that the power deal is “a constitutional sham” and “tainted with secrecy”.

It also said that Ketraco and Adani Energy Solutions did not carry out meaningful public participation around the project, a requirement under Kenya’s Public Private Partnerships Act of 2021, which allows private sector development of public projects.

The Energy ministry said previously that it had run a competitive bidding process.

The Adani Group, founded by Indian billionaire Gautam Adani, sparked anger in Kenya recently for another proposed public-private partnership project to lease the country’s main airport for 30 years in exchange for expanding it.

The LSK and the Kenya Human Rights Commission have also challenged the proposed airport deal in court, saying it is unaffordable, threatens job losses and does not offer value for money.

The Treasury did not, however, address the request by the IMF to provide Kenya with technical assistance in shepherding PPP projects.

It said the newly established fiscal risk committee within the National Treasury- which started work in December 2022- would help the government analyse fiscal risks related to the PPP projects being implemented and recommend mitigations.

The Treasury added that it plans to introduce legal provisions “to limit the total stock of PPPs and ensure that their related fiscal costs and contingent liabilities are accounted for.”

“While the NT has prepared draft regulations for the PPP projects, we have requested IMF technical assistance to develop a joint PIPM-PPP Framework,” Treasury said.

The Treasury added that it plans to launch an online portal of all active PPP projects and contracts by August 2025.

The IMF observes that the government has grown its focus on tapping private capital to implement public projects, with Sh70 billion expected to be mobilised during the current fiscal year.

“These projects are primarily concentrated in the sectors of transportation, water and sanitation, and healthcare, and are planned for execution in the coming years. Sh70 billion is anticipated to be mobilised during FY2024/25,” the multilateral lender says.