Gov’t defends fuel levy securitization, says price spike due to global costs

Roads and Transport Cabinet Secretary Davis Chirchir on Wednesday defended the government’s decision to securitize part of the Road Maintenance Levy Fund, saying it is meant to clear some Ksh.175 billion in pending bills owed to road contractors and revive over 580 stalled road projects across the country.

This is amid public concern over Monday’s spike in fuel prices, which saw super petrol, diesel, and kerosene costs go up by Ksh.8.99, Ksh.8.67, and Ksh.9.65 per litre, respectively, from July 15 through August 14.

Securitization in this case is the sale of the rights by the Kenya Roads Board (KRB) to a Special Purpose Vehicle (SPV), which receives a portion of the future road maintenance levy, specifically Ksh.7 from the current Ksh.25 per litre levy.

The SPV, operating as an independent entity, raises funds upfront based on these rights and uses those funds to clear the verified pending bills.

Chirchir said the securitization does not amount to new public debt but is a structured financial arrangement.

“This is not the creation of new debt. It is the sale of rights to a portion of the existing road maintenance levy to an SPV, which raises funds upfront to pay contractors,” the CS said.

Kiharu MP Ndindi Nyoro on Tuesday claimed the government securitized the fuel levy and borrowed some Ksh.175 billion against it in secret.

But Chirchir argued that President William Ruto’s administration inherited a large backlog of unpaid bills in the roads sector from its predecessor, leaving many projects suspended.

Under the arrangement, the Ksh.7 per litre will be directed towards settling these verified liabilities, without affecting ongoing road maintenance programs or increasing the government’s debt burden.

The CS maintained that the process was carried out transparently and with full legal compliance, under the oversight of the National Treasury and the Attorney General.

“We want to assure the public there is no secrecy here,” he said.

The Energy Ministry has attributed the rise in fuel pump prices to higher global fuel costs, distancing the development from domestic tax adjustments.

Cabinet Secretary Opiyo Wandayi, in a separate statement on Wednesday, explained that pump price calculations are guided by the Petroleum (Pricing) Regulations, 2022, factoring in landed costs, storage, margins, and taxes.

He said international prices for super petrol, diesel, and kerosene rose by 6.72 percent, 9.33 percent, and 8.15 percent, respectively, between May and June 2025, based on S&P Global Platts benchmarks.

“In the latest released prices… the [Energy and Petroleum Regulatory Authority] considered two cargoes of super petrol, two cargoes of diesel, and one cargo of JetA1 fuel. All these cargoes were delivered into the country between June 10 and July 9,” Wandayi said.

The Ministry noted that the only domestic tax change was last year’s July 2024 parliamentary-approved increase in the road maintenance levy from Ksh.18 to Ksh.25 per litre on petrol and diesel.

Per the recent fuel pricing, the other changes have been with the rise in the railway development levy (RDL) and import declaration fee (IDF), which depend on the cost insurance freight (CIF) of the products.

“It is mischievous and factually incorrect to link the recent increase in pump prices with the securitization of the road maintenance levy,” he said, adding that the government has previously cushioned consumers through price stabilization measures.

On Wednesday, Treasury Cabinet Secretary John Mbadi explicitly stated that the National Treasury is seeking to securitize an additional Ksh.5 in the Ksh.18 road maintenance levy, subject to Parliament’s approval.