[Insight]
What the National Infrastructure Fund Bill, 2026 Actually Changes
[Insight]
What the National Infrastructure Fund Bill, 2026 Actually Changes
Opening Perspective
The Bill was gazetted on 23 January 2026 and sponsored by the Leader of Majority Party. The headlines have treated it as another Treasury vehicle. It is not. Read against the existing architecture, it is a structural shift in how Kenya finances, governs, and sequences its national infrastructure pipeline. If passed in its current form, the Bill changes who plans projects, who funds them, and where the capital comes from. Donors, contractors, transaction advisors, and DFI teams should read this as a redesign of the rules they have been working under for the last decade.
The Public Finance Management Act gave Kenya the architecture for budget discipline. The Public Private Partnerships Act, 2021 gave it a framework for private capital. The National Infrastructure Fund Bill is the next move. It pulls the financing of strategic national infrastructure into a single ring fenced fund with its own governance, its own pipeline, and a wide mandate to mobilise non budget capital. The question is whether that consolidation produces better outcomes or simply relocates the bottleneck.
Where This Is Coming From
Kenya's infrastructure financing pattern is not broken. It is fragmented.
Roads sit under the Kenya Roads Board, KURA, KeNHA, and KeRRA. Urban infrastructure runs through KUSP and county budgets. Water sits with WSPs and donor programmes. Energy sits across KenGen, KETRACO, and IPP arrangements. Mortgage and housing finance moved to KMRC. Agricultural value chains move through NAVCDP. Each of these works. The problem is that none of them coordinate at the financing layer. The country has no single instrument designed to absorb large pools of patient capital and route it to commercially viable national infrastructure.
The Bill responds to that gap. Section 4 names its purpose in four lines. Scale up catalytic national infrastructure including highways, railways, ports, electricity generation and transmission, water reservoirs, irrigation, and agribusiness. Mobilise private and non traditional capital including domestic pension funds, collective investment schemes, sovereign wealth funds, and climate finance. Reduce reliance on public debt for commercially viable projects. Strengthen national capacity for origination, structuring, and execution.
That purpose is correct. The execution risk is high.
Kenya's infrastructure financing is not broken. It is fragmented. The Bill creates a single instrument to mobilise patient capital for commercially viable national infrastructure.
ACAL Advisory Team
Public Sector Advisory Practice
Four Things the Bill Actually Changes
1. The pipeline shifts from agency led to portfolio led
Today, each implementing agency builds its own project list, negotiates its own funding, and reports its own performance. A national pipeline only exists as the sum of agency pipelines.
The Bill changes that. Section 18 requires the Board to adopt an Investment Plan before each financial year, anchored on national strategic objectives. Section 21 requires the Board to develop a five year Investment Policy, approved by Cabinet, that specifies priority sectors, proposed projects, expected returns, asset allocation, and exposure limits per sector and project. Section 19 binds the Fund into annual performance contracts with the Cabinet Secretary for the National Treasury, with targets that safeguard long term sustainability, enable commensurate returns, and minimise fiscal cost and risks to the national exchequer.
For donors and DFIs, this is meaningful. The conversation moves from is this project ready to where does this project sit in the Investment Plan. Programming windows align around the Plan and the five year Investment Policy, not around individual agency cycles. Pipeline visibility, properly executed, becomes a competitive advantage for Kenya. The market has been asking for this kind of national line of sight for a long time.
2. Project preparation becomes an in house, financed function
One of the quiet failures of Kenya's pipeline has been preparation. Feasibility studies, environmental and social safeguards, design, and procurement readiness have been treated as overhead, typically the first costs squeezed in tight budget cycles. The result has been a long pipeline of half prepared projects and a chronic gap between announcement and groundbreaking.
The Bill positions preparation as core. Section 22(1) requires the Fund to develop sufficient capacity to oversee feasibility studies, prepare investment plans, and negotiate investment agreements. Section 23 makes feasibility studies a function of the Fund itself, covering technical, legal, social, economic, environmental, affordability, and land requirements. Section 22(2) authorises the Fund to engage development finance institutions of which Kenya is a member, to leverage their preparation, structuring, and finance capabilities. Preparation is built in house, with DFIs as accelerants.
For development partners, this changes the entry point. The value of a preparation grant is lower when preparation is funded inside the Fund. The value of embedded technical capacity, of co financing later in the project cycle, and of secondments into the Fund's preparation unit goes up. Firms that earn margin in transaction advisory and project structuring should expect demand to shift from donor funded preparation to Fund funded preparation.
3. The funding base broadens beyond the budget
This is the most significant single change in the Bill and it has received the least attention.
Section 4(b) names mobilisation of private capital and non traditional sources of infrastructure finance, including domestic pension funds, collective investment schemes, sovereign wealth funds, and climate finance. Section 4(c) names reduction of reliance on public debt for commercially viable infrastructure as an explicit objective. Section 29 lists the Fund's capital sources. Proceeds from privatization and disposal of government assets. Monies appropriated by Parliament. Fees and assets accruing to the Fund. Monies provided, donated, or lent from any other source.
Read together, these provisions reframe how Kenya intends to finance the next wave of national infrastructure. Pension funds, collective schemes, sovereign wealth funds, and climate finance become the targeted pools. Privatization proceeds become a recurring channel into the Fund. Public debt is positioned as a financing route to be reduced, not relied on.
Section 12(2)(a) is also notable. The Board shall not borrow or take credit against its balance sheet. The Fund is not designed as a leveraged vehicle. It is designed to assemble equity and concessional capital, structure projects, and use Government Support Measures to make individual transactions bankable. That is a deliberate design choice. It limits the Fund's downside but also caps the speed at which it can scale.
For the Green Climate Fund, the African Development Bank, the World Bank, the IFC, the National Social Security Fund, and the larger Kenyan pension administrators, this is a direct invitation. The Bill creates a domestic counterparty that has been missing.
4. Government Support Measures formalise credit enhancement
Section 25 is one of the most operationally important provisions in the Bill. The Cabinet Secretary may issue, on the advice of the Board, a binding undertaking, letter of support, letter of credit, credit guarantee whether partial or full, partial risk guarantee, political risk insurance, or any other instrument determined under the law on public finance management. Issuance is constrained to lowering political risk premiums or underwriting approved commercial risks under negotiated agreements.
The significance is that credit enhancement, until now negotiated case by case across PFM, PPP, and project specific laws, becomes part of the Fund's standard toolkit. This formalises what investors have been asking for in the Kenyan market for a long time. Properly used, these instruments compress the cost of capital on bankable projects and pull commercial lenders into transactions that would otherwise stay donor only.
The risk is overuse. Government support measures issued too freely become contingent liabilities on the sovereign balance sheet. The Bill leaves that calibration to the Cabinet Secretary and the Board, with oversight from the Treasury, the Auditor General, and Parliament. The first eighteen months of issuance will set the tone.
Where Counties Stand
The Bill is explicit on this point. The Memorandum of Objects states that the Bill does not concern County Governments as it does not affect the functions and powers of County Governments under the Fourth Schedule of the Constitution. Section 4 lists the catalytic infrastructure the Fund targets. National highways and railways, air and sea ports, electricity generation, transmission and distribution, water reservoirs, irrigation, and agribusiness infrastructure. These are national functions.
This is not an oversight. The Fund is designed as a national instrument, sitting alongside, not above, the equitable share and the county development financing channels.
The implication for counties is subtle. They are not direct recipients of Fund finance. But where county jurisdictions sit along the path of a Fund backed national highway, transmission line, irrigation scheme, or port, the local benefits and burdens will be substantial. County planning units that anticipate Fund pipeline projects in their CIDPs, secure way leaves and ESIAs early, and structure complementary investments will draw outsized economic benefit. Counties that wait for the Fund pipeline to arrive at their borders will be late.
For donor programmes that work with counties, this is a clarifying moment. The Fund does not replace donor support to counties. It creates a parallel national channel that counties need to position to interact with.
What Donors and DFIs Should Actually Do
Three moves matter in the next twelve months.
First, position pipeline support around the Fund's preparation unit. The most valuable donor money in 2026 is not project finance. It is technical assistance to the preparation capability that Section 22 requires the Fund to build, and to the Investment Policy that Section 21 requires Cabinet to approve. Embedding strong project preparation discipline early shapes the Fund's behaviour for the next decade. Embedding it late is much harder.
Second, treat the early Fund backed transactions as a credit reference, not a deal. The first three to five transactions the Fund closes will set the market's read on the vehicle. DFIs should prioritise balance sheet capacity to crowd into these early deals with terms that demonstrate what blended structures can do. Discipline at this stage compounds. A weak first transaction takes years to undo.
Third, engage the pension and climate finance pools directly. Section 4(b) names pension funds and climate finance as explicit mobilisation targets. The Fund's capacity to actually access these pools will depend on the bankability and risk profile of the first transactions. Coordinated work between DFIs, Treasury, the Retirement Benefits Authority, and the Capital Markets Authority on the regulatory pathway for pension capital into Fund instruments will move this faster than waiting for the Fund to assemble the architecture alone.
What Government Needs to Get Right
The Bill creates the architecture. Execution will determine whether the Fund becomes the next KMRC or another entity quietly absorbed into a parent ministry.
Three issues stand out.
Governance independence. Sections 6 to 10 are clear on intent. The Board has eight members. A chairperson who is an independent director. Four other independent directors. Two directors with proven experience in senior leadership roles in development banking. The Cabinet Secretary to the National Treasury or a designated representative. The CEO as an ex officio member. Section 8 lists ten disqualifications for independent directors, including affiliation with a political party in the preceding five years, employment by a Government Owned Enterprise in the preceding five years, and significant supplier, customer, or financial institution relationships. These provisions are strong on paper. Their durability will be tested in the first three director appointments. Capital does not price the intent of legislation. It prices the behaviour of the people running it.
Pipeline transparency. Sections 26 and 27 require quarterly and annual reports to the Cabinet Secretary, half yearly reports to Cabinet, annual reports to the National Assembly, and publication of audited reports and performance evaluations on the Treasury and Fund websites. The harder version of this is a queue that is publicly visible, with project status, decisions, and sequencing logic in the open. The easier and weaker version is a curated list with no public reasoning behind it. The Fund should aim for the harder version from day one.
Calibrated use of Government Support Measures. Section 25 instruments are valuable when used selectively and properly priced. They are dangerous when issued routinely. The Treasury, the Office of the Auditor General, and the Controller of Budget will need to maintain visibility on cumulative exposure across guarantees, letters of credit, and political risk cover. A clear publication regime for issued support measures, with maturity and exposure data, would help market confidence as much as it would help fiscal discipline.
Closing Perspective
The National Infrastructure Fund Bill, 2026 is not the most attention grabbing piece of legislation in this session. It will be one of the most consequential. The Bill consolidates Kenya's strategic infrastructure financing into a single vehicle, repositions project preparation as a financed in house function, broadens the capital base to pension funds, climate finance, sovereign wealth, and privatization proceeds, and formalises credit enhancement through Government Support Measures.
Done well, it shortens the distance between policy intent and groundbreaking. It pulls private and concessional capital into projects that have struggled to close. It positions Kenya as a credible destination for the kind of patient infrastructure capital that has been parked elsewhere on the continent.
Done poorly, it adds another layer of process to a system that already has too many.
The deciding factor is not in the Bill itself. It is in what gets built around it in the first eighteen months. The first directors appointed. The first Investment Policy approved by Cabinet. The first three transactions closed. The first guarantees issued. Donors, governments, and advisors who treat this as a routine policy moment will be late. Those who treat it as a redesign of the working environment will be positioned for the decade that follows.
This is the moment to read the Bill carefully, engage the early structuring, and place the right people around the right table.
ACAL Consulting Africa Limited is a development advisory practice retained by governments, donors, and development finance institutions across East Africa. We work at the intersection of policy, capital, and delivery.
Strategic Insights That Drive Business Success
Strategic Insights That Drive Business Success
Strategic Insights That Drive Business Success
