IMF flags Sh175b fuel levy plan over debt, transparency risks
Business
By
Brian Ngugi
| Jul 29, 2025
The International Monetary Fund (IMF) has raised transparency concerns as Kenya advances plans to securitise part of its fuel levy — a Sh175 billion financing strategy drawing sharp criticism for potentially bypassing parliamentary oversight and constitutional safeguards.
The National Treasury says the securitisation move will fast-track road construction and clear pending bills by converting future fuel levy revenues into tradeable securities.
However, legal experts warn that the use of Special Purpose Vehicles (SPVs) for this off-balance-sheet arrangement may breach debt sustainability principles and lock in future revenues for investor payouts.
While declining to comment directly on Kenya’s proposal, IMF spokesperson Julie Kozack highlighted the importance of transparency in such transactions.
READ MORE
Morocco eye historic third Chan title
Morocco jets in ahead of CHAN 2024
Turkey battles wildfires amid strong winds, heatwave
Why Gen Zs are out of patience and time
Zero pressure for McCarthy and his Harambee Stars marshals
McCarthy announces Harambee Stars final squad for CHAN 2024
Mvurya says stadia projects prioritise requirements for hosting CHAN, AFCON
How Nigeria's 'banditry' crisis has evolved
Inquest into Rex Masai's death reveals police cover-up allegations
In an emailed response to The Standard, Kozack stated: “The IMF does not comment on or endorse specific transactions. However, as a general principle, any securitisation transaction should be assessed on a case-by-case basis to understand the overall implications, including for debt sustainability, pricing of associated risks by other creditors, and compliance with negative pledge clauses that limit a borrower’s ability to pledge assets to other lenders.”
She underscored “the importance of debt transparency, which the IMF, together with the World Bank, has been working to promote among debtors and creditors.”
Kozack pointed to IMF-World Bank policy papers from 2020 and 2023 offering guidance to public borrowers on collateralised financing.
“The IMF stands ready to support Kenya in further strengthening public financial management and debt transparency, with a view to safeguarding fiscal responsibility and overall debt sustainability,” she added.
National Treasury Cabinet Secretary John Mbadi has defended the government’s decision, saying the move aims to unlock stalled infrastructure and clear mounting contractor arrears.
Mbadi said the government has already raised over Sh60 billion from the levy, and targets Sh175 billion in total. An additional Sh7 per litre levy — on top of the existing Sh18 road maintenance levy — will support this plan.
“In the current fiscal year, if we use even half of that and add it to our regular allocation, we will have about Sh120 billion — enough to settle outstanding bills,” Mbadi said, projecting completion of road works within two years.
Securitisation, he said, transforms future revenue streams into investable securities, unlocking immediate capital.
But the plan has stirred significant legal and constitutional concerns over transparency, intergenerational equity, and fiscal control.
While the Kenya Roads Board (KRB) cites Section 32A(2) of its Act, which allows a portion of the fund to be set aside for “securing additional funding,” legal experts argue the interpretation could undermine oversight structures.
Critics warn that allocating Sh7 out of every Sh25 collected per litre of fuel for the next decade effectively creates off-book liabilities via SPVs — liabilities that evade parliamentary scrutiny under Articles 201 and 211 of the Constitution.
“This arrangement effectively privatises public revenue collection while maintaining government service delivery liability,” one legal expert said. “It risks becoming a catastrophic template for monetising government revenue streams across the public sector.”
Other concerns include breaching Article 201(c) on intergenerational equity, with future parliaments unable to reallocate road funds while investors retain first claim.