Ruto approves bill leveraging 90pc of rail levy for borrowing
National
By
Macharia Kamau
| Mar 14, 2026
President William Ruto signs law allowing the use of the rail levy to secure loans for railway development. [File, Standard]
President William Ruto has signed into law a bill that allows the government to use nearly all the funds collected through the Railway Development Levy (RDL) as collateral for new loans. The new law allows the government to use up to 90 per cent of the money collected through the levy to “secure additional funds”, which will then be used to finance railway developments such as construction and rehabilitation of railway lines.
The Miscellaneous Fees and Levies (Amendment) Bill, 2026 – which Ruto assented to law yesterday – also expands the scope of the levy to include financing a broader range of railway transport infrastructure beyond the construction.
The levy is imposed on all imports at two per cent, which went up from 1.5 per cent in 2024. The government collected Sh36 billion in the 2021/22 financial year and this has gone up to Sh50 billion in 2024. The new law provides that “a proportion of the Railway Development Levy Fund (RDLF) not exceeding 90 per cent of the fund might be used to secure additional funds”.
“Another notable provision is that up to 90 per cent of the funds for the Railway Development Levy Fund may be used to secure additional financing for railway infrastructure projects,” reads a Brief of the Bill by Parliament when it forwarded it to the President for assent.
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“This means that the funds can be used to attract further investment and financing, to support railway development and infrastructure in the country. It therefore supports the Government’s policy objective of mobilising sustainable financing for strategic railway transport infrastructure and strengthening the institutional framework for the management and utilisation of the Railway Development Levy.”
The government has, in the recent past, argued that borrowing against taxes to be collected in the future or securitisation of levies and taxes is an innovative way to finance projects without increasing the country’s public debt. Critics, however, caution that securitisation is a roundabout way of going towards borrowing and would hurt Kenyans in the future.
The government has securitised a portion of the Road Maintenance Levy to borrow Sh175 billion that it said would be used to clear pending bills for road contractors and enable them complete stalled road projects.
The road levy is financed by motorists every time they fuel at Sh25 per litre of either diesel or super petrol, having been recently increased from Sh18 per litre. In the case of securitising the RDL, the Shippers Council of East Africa (SCEA) had advised that the 90 per cent threshold is too high and instead proposed lowering it to 75 per cent.
“Allowing 90 per cent of the Fund to be used as security for further borrowing could lead to over-leveraging and leave insufficient liquidity for the Fund’s primary operational purposes. A lower cap promotes better fiscal sustainability,” said SCEA in its submissions to Parliament.
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