Explainer: How Treasury’s fuel levy proposal will affect motorists
By Aloys Michael, May 2, 2026The National Treasury has proposed a 50 per cent reduction in the portion of the fuel levy that is earmarked for the Road Annuity Fund, a move that is expected to slightly ease fuel costs for motorists.
The proposal is contained in the Road Maintenance Levy Fund (Amendment) Bill, 2026, which seeks to amend the Road Maintenance Levy Fund Act (Cap. 427). Under the current law, Ksh3 per litre of fuel levy is directed to the Road Annuity Fund. The new bill proposes cutting this allocation to Ksh1.50 per litre.
In legislative terms, the amendment states that the section will be changed by deleting the words ‘three shillings’ and replacing them with one shilling and fifty cents.
While the overall Road Maintenance Levy remains unchanged, the adjustment only affects the portion ring-fenced for road annuity projects, meaning the broader fuel levy structure is largely untouched.
For motorists, the change translates into modest savings at the pump, with an estimate that filling a 50-litre fuel tank could become cheaper by about Ksh75 to Ksh80.
Commercial transport operators would also feel the difference. A 14-seater matatu operating the Rongai–Nairobi CBD route, making around eight round trips daily and consuming roughly 46 litres of diesel, would save about Ksh75 per day.
A larger 33-seater Isuzu NQR on the same route, burning about 74 litres daily, could save approximately Ksh120 per day.
The Road Annuity Programme has been a key government model for road construction, allowing infrastructure projects to proceed without upfront public expenditure.
Instead, contractors and financiers are repaid over time using a dedicated fuel levy stream, which has largely depended on the Ksh3 per litre allocation now targeted for reduction.
The proposal comes at a time when a significant portion of the fuel levy has already been committed through securitisation. The government has already pledged Ksh12 per litre of the Ksh25-per-litre levy to raise Ksh300 billion in financing.
The first securitisation tranche was completed in February 2025, when Ksh7 per litre was used to raise Ksh175 billion aimed at clearing pending road sector bills.
A second tranche was later approved by the cabinet in November, involving Ksh5 per litre expected to raise an additional Ksh125 billion for future contractor payments.
However, the financing strategy has drawn scrutiny, including from the International Monetary Fund (IMF), which has pushed for Kenya to classify securitised revenues as public debt. Such a reclassification could significantly raise the country’s reported debt stock and affect negotiations for a new IMF lending programme.
At the same time, Treasury Cabinet Secretary John Mbadi has not clarified how the reduction in the annuity allocation will affect already securitised fuel levy commitments or how any resulting funding gap for road annuity projects will be covered.