Kenya Seeks 2 Billion Airport Expansion Funding After Adani Deal Collapse

Kenya Pivots to Development Banks for $2 Billion Airport Expansion Following Adani Deal Collapse

Kenya’s aviation sector is at a decisive crossroads as the government seeks $2 billion in international development financing to expand Jomo Kenyatta International Airport (JKIA). This comes nine months after the abrupt cancellation of a high-profile deal with India’s Adani Group, following fraud charges against its founder. The move signals a fundamental shift in Kenya’s infrastructure development strategy, reflecting both the country’s urgent need to address capacity constraints at its busiest airport and a broader commitment to transparency in public-private partnerships.

The government, led by Transport Cabinet Secretary Davis Chirchir, has approached agencies including the Japan International Cooperation Agency, China Exim Bank, KfW, the European Investment Bank, and the African Development Bank. The plan is to leverage JKIA’s balance sheet for the expansion, a strategy that keeps operational control within Kenya while tapping into international expertise and lower-cost capital. This pivot occurs as JKIA faces unprecedented passenger growth and mounting regional competition from Ethiopia and Rwanda, both of which are investing heavily in their own aviation infrastructure.

The outcome of Kenya’s new approach will have significant implications for the country’s economic competitiveness, regional connectivity, and fiscal stability. With JKIA operating well beyond its designed capacity and the government’s debt levels under scrutiny, the success of this project is critical not just for aviation, but for Kenya’s broader economic trajectory.

Background: The Rise and Fall of the Adani Deal

Kenya’s initial plan to expand JKIA relied on a $2.5 billion proposal from India’s Adani Group, which would have involved a 30-year lease and major upgrades, including a second runway. The deal, however, was negotiated without a public tender and lacked transparency, sparking controversy among citizens, aviation workers, and experts. The process was brought to public attention by a whistleblower, Nelson Amenya, leading to protests and strikes over fears of job losses and foreign control of a strategic asset.

The situation escalated dramatically in November 2024 when Gautam Adani, founder of the Adani Group, was indicted in the United States on charges of securities fraud, wire fraud, and violations of the Foreign Corrupt Practices Act. The indictment alleged bribery and misrepresentation in securing contracts and raising funds internationally. In response, President William Ruto swiftly cancelled all government deals with Adani, including the JKIA expansion and a separate power transmission line project, citing a zero-tolerance approach to corruption.

This reversal underscored the challenges of conducting due diligence with large international conglomerates and highlighted the risks of opaque public-private partnerships. It also forced Kenya to reconsider its airport expansion strategy, prioritizing transparency and public oversight in future infrastructure deals.

“In the face of undisputed evidence or credible information on corruption, I will not hesitate to take decisive action.”, President William Ruto, November 2024

JKIA’s Infrastructure Crisis and Capacity Constraints

JKIA’s infrastructure woes are not new. The devastating fire of August 2013 exposed serious deficiencies in emergency response and facility resilience, with firefighters resorting to buckets and water shortages hampering efforts. The fire led to widespread flight cancellations and highlighted the airport’s vulnerability as a critical regional hub. Subsequent reports of looting and operational chaos raised additional concerns about management and security protocols.

In recent years, the airport has struggled to keep pace with growing passenger numbers. Designed for 7.5 million passengers, JKIA handled 8.75 million in 2024, well above its intended capacity. This surge has strained existing terminals, with recurring issues such as roof leaks during heavy rains and insufficient cargo handling facilities. The single-runway configuration remains a major bottleneck, despite long-standing plans for a second runway capable of handling larger aircraft.

These challenges have direct economic consequences. JKIA is vital for Kenya’s tourism and export industries, particularly for the country’s position as a leading flower exporter. Inadequate airport capacity has limited the ability to attract more international airlines and has put pressure on Kenya Airways, which relies on JKIA as its primary hub.

The New Funding Strategy: Development Banks and Alternative Financing

In the wake of the Adani deal’s collapse, Kenya has turned to development bank financing, a model that emphasizes government ownership and oversight. Rather than granting a long-term concession to a private operator, the government now seeks to finance the expansion through loans secured against JKIA’s revenue streams. This approach is designed to maintain national control over a strategic asset while benefiting from the technical and financial expertise of international development partners.

The African Development Bank, Japan International Cooperation Agency, China Exim Bank, KfW, and the European Investment Bank are among the targeted lenders. Each brings unique strengths: AfDB has continental experience in airport projects, Chinese banks provide large-scale infrastructure financing, and European institutions typically enforce rigorous environmental and social safeguards. By diversifying its funding sources, Kenya aims to secure favorable terms and reduce dependency on any single creditor.

The government also plans to issue a securitized bond backed by fuel levies to fund parallel road projects, demonstrating a broader commitment to innovative financing. However, development bank loans require comprehensive feasibility studies, environmental assessments, and stakeholder consultations, steps that could extend project timelines. The government’s stated goal is to break ground before December 31, 2025, adding urgency to the financing and planning process.

“Instead of bringing concessioning to build the airport, we build the airport that we can concession later.”, Transport Cabinet Secretary Davis Chirchir

Regional Competition and Strategic Positioning

Kenya’s urgency is heightened by fierce regional competition. Ethiopia is constructing Bishoftu International Airport, a $10 billion project with a planned capacity of up to 110 million passengers, far surpassing JKIA’s current and projected capacities. Ethiopian Airlines, Africa’s most successful carrier, is central to this strategy, aiming to make Addis Ababa a top-tier global transit hub.

Rwanda, too, is investing heavily in Bugesera International Airport, with an initial capacity of 7-8 million passengers and expansion plans to 14 million by 2032. The project is supported by Qatar Airways, which holds a majority stake in RwandAir, further strengthening Kigali’s competitive position in East African aviation.

These developments threaten to erode Kenya’s traditional dominance as the region’s aviation hub. Analysts warn that without rapid and substantial upgrades, JKIA risks being overtaken not just by Addis Ababa, but also by Kigali. This would have cascading effects on Kenya’s tourism, trade, and investment attractiveness.

“The emergence of three major airports within a two-hour radius of each other creates unprecedented competitive dynamics for regional aviation.”, Katakenya, 2025

Financial Implications and Debt Concerns

Kenya’s ambitious expansion plans come amid growing fiscal pressures. Public debt reached KSh 11.51 trillion ($89.3 billion) in May 2025, with debt servicing consuming nearly 70% of government revenues, well above the IMF’s recommended threshold for developing economies. Credit ratings from major agencies remain in the high-risk category, impacting the country’s borrowing costs and access to capital.

The composition of Kenya’s debt is shifting, with increased reliance on short-term domestic borrowing and rising external debt due to currency depreciation. While development bank loans offer longer repayment periods and lower interest rates, the $2 billion airport project represents a significant addition to Kenya’s debt stock and must be carefully structured to avoid undermining fiscal sustainability.

The government’s fiscal consolidation strategy aims to increase revenue growth and reduce deficit levels, but success depends on sustained economic performance and effective project execution. Lessons from previous multi-donor airport financing efforts provide some reassurance, but the current project’s scale and complexity present new challenges.

“The use of JKIA’s balance sheet as collateral for development bank financing represents an innovative approach that could limit the project’s impact on government debt ratios.”, Cytonn Investments, 2025

Implementation Timeline and Technical Challenges

The government’s goal to commence construction by the end of 2025 is ambitious. The expansion includes a second runway, a new terminal, and supporting infrastructure, all of which must be built while maintaining ongoing airport operations. Environmental and social assessments, procurement processes, and coordination among multiple lenders add further complexity.

Technical requirements are demanding: the new runway must accommodate wide-body aircraft, and terminals must integrate modern passenger processing and security systems. Construction must be phased to minimize disruption, and lessons from past incidents, such as the 2013 fire, underscore the need for robust safety and quality controls.

Recent investments in operational equipment and emergency repairs highlight both progress and the scale of ongoing challenges. Weather-related disruptions and contractor delays remain risks, and effective coordination with Kenya Airways and other stakeholders will be crucial to maintaining service levels during the expansion.

Conclusion

Kenya’s shift to development bank financing for JKIA’s $2 billion expansion marks a strategic realignment in the country’s approach to infrastructure development. The collapse of the Adani deal, amid serious corruption allegations, prompted a reevaluation of public-private partnerships and reinforced the government’s commitment to transparency and national control over critical assets.

The new strategy leverages the strengths of multilateral development institutions and prioritizes sustainable financing, but it faces significant challenges in terms of fiscal constraints, technical complexity, and regional competition. The ability to execute the expansion on time and within budget will be a key test for Kenya’s leadership and its aspirations to remain East Africa’s aviation hub. The broader lesson for other developing nations is clear: transparency, prudent financing, and strategic partnerships are essential for successful infrastructure development in a rapidly evolving regional landscape.

FAQ

Q: Why did Kenya cancel the Adani Group airport deal?
A: The deal was cancelled after Adani Group’s founder was indicted in the United States on fraud and corruption charges. The decision reflected concerns over transparency, due diligence, and public opposition to the lack of a public tender process.

Q: How is Kenya planning to finance the JKIA expansion?
A: Kenya is seeking $2 billion in loans from international development banks, including the African Development Bank, Japan International Cooperation Agency, China Exim Bank, KfW, and the European Investment Bank. The financing will leverage JKIA’s revenue streams and assets.

Q: What are the main challenges facing the airport expansion?
A: Key challenges include securing timely financing, managing high public debt, coordinating among multiple lenders, meeting technical and environmental standards, and maintaining airport operations during construction.

Q: How does regional competition affect Kenya’s airport plans?
A: Ethiopia and Rwanda are both developing major new airports with significant capacity, threatening Kenya’s position as East Africa’s aviation hub. Delays or shortcomings in JKIA’s expansion could see Nairobi lose transit traffic and economic opportunities to Addis Ababa and Kigali.

Q: When is construction expected to start?
A: The government aims to break ground on the JKIA expansion before December 31, 2025, but this depends on the timely completion of financing, planning, and environmental approval processes.

Sources: Reuters, OCCRP, Business Insider Africa, Kenyan Wall Street