Debt burden: Inside Treasury's plan to trap Kenya with billions in hidden debt

President William Ruto is set to saddle Kenyans with more debt through the fuel levy, aiming to borrow billions more under his controversial securitisation strategy.

The government plans to raise an additional Sh120 billion using the Road Maintenance Levy as collateral, further stretching funds meant for road repairs, with a third of the kitty already tied up as collateral.

On Friday, the Roads and Transport Ministry said it would securitise Sh5 per litre from the levy to raise Sh120 billion. Previously, the government had used Sh7 per litre as collateral to borrow Sh175 billion, which is being used to pay road contractors.

Motorists fund the levy, paying Sh25 per litre of petrol or diesel whenever they refuel.

Increasing the securitised portion by Sh5 would bring the total to Sh12 per litre, leaving road agencies and county governments with just Sh13 per litre for actual maintenance.

Transport Cabinet Secretary Davis Chirchir said the extra funds would be raised using the additional Sh5 as collateral to support road repair and maintenance, noting that reliance on Exchequer financing and existing levy collections has been insufficient to meet growing needs.

“The roads subsector has traditionally struggled with funding, hindering its ability to meet the country’s road maintenance and development needs. To overcome these system challenges, the Cabinet approved two major measures,” said Chirchir.

He explained that the measures involve the “securitisation of Sh7 per litre of the Road Maintenance Levy Fund (RMLF) to raise about Sh175 billion to settle pending bills, and the securitisation of Sh5 per litre to raise Sh120 billion, disbursed over two years, to support ongoing works.”

Speaking before the Senate Committee on Roads, Transportation and Housing, Chirchir said the government had so far raised Sh139 billion through the initial Sh7-per-litre securitisation, which began in February 2025, and is still pursuing the remaining funds to reach the Sh175 billion target.

He added that the money is being raised through bridge facilities provided by banks.

The Road Maintenance Levy is managed by the Kenya Roads Board, which distributes funds to road agencies – including the Kenya National Highways Authority, Kenya Urban Roads Authority, Kenya Rural Roads Authority, Kenya Wildlife Service, and county governments – for road repairs and maintenance.

Collections through the levy reached Sh119 billion in the year to June 2025.

In July 2024, the government raised the levy from Sh18 to Sh25 per litre of petrol and diesel, later announcing that the additional Sh7 per litre would be used as collateral to raise funds to pay contractors’ debts.

The plan faced opposition from various stakeholders, with Kiharu MP Ndindi Nyoro among the vocal critics, arguing that securitisation is simply “debt by another name.”

“This borrowing is not reflected in official debt records, and Parliament was never consulted. This raises serious concerns about transparency, legality and the long-term sustainability of public finances,” said Nyoro at the time.

In the wake of the high cost of fuel following the crisis in the Middle East, Nyoro has been among those pushing for a reversal of the levy hike to shield the economy from the sharp rise in petroleum prices.

The government has recently considered lowering the levy, which would reduce fuel costs and provide some relief to Kenyans.

The IMF has also clashed with the National Treasury, arguing that securitisation and other off-budget borrowing should be classified as debt. The global lender has made this a condition for Kenya to access additional funding.

The IMF noted that a narrow legal definition of debt could conceal a significant portion of the country’s obligations.

Kenya’s public debt stood at Sh12.39 trillion as of January, according to the Treasury.

An IMF April 2026 High-Level Summary and a detailed technical assistance assessment concluded that while Kenya’s published debt statistics are broadly accurate, the government is “largely not observing” international standards on transparency. 

The key finding by the IMF is that Kenya’s Constitution defines public debt too narrowly, as only loans or securities that charge the Consolidated Fund. 

This excludes a growing stock of other liabilities, including pending bills estimated by the IMF at Sh684 billion.

“The Kenyan Government mustn’t maintain only a narrow definition of public debt,” the IMF mission, led by David Bailey and Naoto Osawa, wrote after a July 2025 assessment.

“More comprehensive public debt statistics reports should be produced… to provide full transparency and address any user concerns of there being ‘hidden debts.” 

In seeking new ways to finance the road sector needs, including securitisation, Chirchir said, while Kenya’s network of roads has been on the rise as new roads are constructed and, in turn, a growing need for road repair funds, allocations have remained low, resulting in pending bills but also failure to undertake repairs on major roads. 

He noted that while the roads sector requires Sh487.5 billion over the 2026/27 financial year, Treasury has proposed an allocation of Sh232 billion in the budget, resulting in a shortfall of Sh256 billion. 

Finance experts have expressed fears of debt default if key strategies to reduce spending excesses and increase revenues are not implemented. 

They say the government’s current strategy of securitising some revenue streams is more like “kicking the can down the road”.

A recent presentation by experts from the tax consultancy firm EY shows that while Kenya’s national debt-to-GDP ratio is projected to average 68.2 per cent this year, this figure is likely to rise. This is against a target of 55 per cent as envisioned by the National Treasury. 

“Looking at how we have been trending on a year-to-year basis, it is unlikely that we are going to go lower,” said EY Kenya tax associate director Robert Maina. 

He noted that the push by multilateral lenders, such as the IMF, to include off-balance sheet borrowings in the national debt will only push this figure up. 

“If they do succeed, this number will go up. Then we will continue borrowing more than we budget for in our initial budget policy statement,” Maina said.