Motorists Set to Save on Fuel Costs as Treasury Proposes Levy Reduction Ahead of EPRA Review

Kenyan motorists could soon enjoy lower fuel costs after the National Treasury proposed reducing part of the fuel levy that is allocated to the Road Annuity Fund.

If approved by Parliament, the changes are expected to save consumers nearly 80 cents for every Ksh100 they spend on fuel.

The proposal is contained in the Road Maintenance Levy Fund (Amendment) Bill, 2026, which seeks to amend the existing Road Maintenance Levy Fund Act (Cap. 427).

The Bill specifically targets the amount currently set aside for the Road Annuity Programme, reducing it by half.

At the moment, Section 3(2) of the Act requires Ksh3 collected from every litre of fuel sold in Kenya to be channelled into the Road Annuity Fund. The Treasury now wants that amount reduced to Ksh1.50 per litre.

Part of the Bill states that the law will be amended “by deleting the words ‘three shillings’ and substituting therefor the words ‘one shilling and fifty cents.’”

The proposed amendment does not remove or reduce the overall Road Maintenance Levy charged on fuel.

Instead, it only affects the portion of the levy reserved for the Road Annuity Fund, meaning motorists would still continue paying the broader levy used to support road maintenance and infrastructure projects across the country.

According to calculations by Newshub.co.ke, the changes could result in noticeable savings for ordinary Kenyans. A motorist filling a 50-litre fuel tank could save between Ksh75 and Ksh80 depending on fuel prices and consumption patterns.

Public transport operators are also expected to benefit from the proposal. For example, a 14-seater matatu operating on the busy Rongai–Nairobi CBD route and making around eight round trips daily consumes an estimated 46 litres of diesel every day. Under the proposed changes, such an operator could save close to Ksh75 daily on fuel costs.

Meanwhile, a larger 33-seater Isuzu NQR matatu on the same route, which uses approximately 74 litres of diesel daily, could save about Ksh120 every day.

If implemented, the savings could help transport operators manage rising operational costs, although it remains unclear whether passengers would eventually benefit through lower fares.

The Road Annuity Programme has been one of the government’s key methods for financing road construction projects without paying contractors upfront.

Under the arrangement, private contractors and financiers build roads first, while the government repays them gradually using money collected from the fuel levy.

For years, the Ksh3 per litre allocation has acted as a guarantee to contractors and lenders that they would eventually recover their money.

Because of this, the proposed reduction raises fresh questions about how ongoing and future annuity-funded road projects will be financed.

The Treasury’s proposal also comes at a time when a significant portion of the same fuel levy has already been committed to long-term borrowing arrangements by President William Ruto’s administration.

The government has already securitised Ksh12 out of the Ksh25 fuel levy in order to raise Ksh300 billion through bonds. This means nearly half of the levy collected from motorists has been pledged to investors and bondholders for the next ten years.

The first phase of the securitisation process took place in February 2025. During that stage, the government used Ksh7 per litre of the levy to secure Ksh175 billion, mainly aimed at clearing pending bills owed to contractors in the road sector.

Later, in November, the Cabinet approved a second phase that securitised an additional Ksh5 per litre of the levy. The move was intended to raise another Ksh125 billion for future contractor payments and road infrastructure financing.

However, the securitisation arrangement has attracted criticism and remains a major issue between Kenya and the International Monetary Fund (IMF).

In April, Bloomberg reported that the IMF wants Kenya to classify the securitised fuel levy revenue as public debt. If that happens, Kenya’s total public debt could rise beyond Ksh13 trillion, increasing pressure on the government’s borrowing levels.

The debt classification issue is considered important because it may influence whether President Ruto’s administration secures a new IMF support programme after the previous lending arrangement expired earlier this year.

Despite the Treasury proposing the reduction in the annuity allocation, Treasury CS John Mbadi has not yet explained how the government plans to cover the funding gap that could emerge from cutting the levy contribution by Ksh1.50 per litre.

Questions also remain about whether the reduced allocation could affect repayment commitments tied to the already securitised fuel levy, as well as the future of road projects that depend on annuity financing.

If approved, the changes could provide some relief to motorists struggling with the high cost of living, even as concerns continue to grow over Kenya’s rising public debt and long-term infrastructure financing strategy.

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