Kenya is seeking parliamentary approval to channel up to 90 percent of annual collections from the Railway Development Levy into securing new financing for railway projects, including the Standard Gauge Railway. The proposal is contained in the Miscellaneous Fees and Levies (Amendment) Bill 2025, which aims to widen the use of funds raised through the levy.
The Railway Development Levy is charged at two percent of the customs value of all imports and currently supports railway construction on a pay-as-you-go basis. If the Bill is passed, the levy will be used as collateral to raise fresh capital, marking a shift towards debt-backed infrastructure financing. Under the proposed changes, up to 90 percent of the Railway Development Levy Fund may be pledged to secure loans, bonds or other structured financing for railway infrastructure.
The approach mirrors the securitisation model already applied to the Road Maintenance Levy Fund, where a portion of future fuel levy collections has been used to back road bonds. This followed the increase of the fuel levy to Sh25 per litre in July 2024, allowing the government to raise funds upfront while committing future revenues to repayments.
While the model has been praised for easing cash-flow constraints in the roads sector, it has also raised disagreements between the National Treasury and the International Monetary Fund over whether the financing should be treated as public debt. Treasury Cabinet Secretary John Mbadi has argued that once levy rights are sold to a special purpose vehicle, the risk does not sit with the government.
The proposed law would effectively turn the Railway Development Levy Fund into a financing anchor, enabling the State to accelerate railway expansion and upgrades at a time of rising debt-servicing costs and tight fiscal space. Rail infrastructure, viewed as central to reducing freight costs and boosting regional trade, has faced persistent funding gaps.
Also Read: IEBC Defends Data-Sharing Talks With Immigration, NRB, Affirms Independence
The Bill also broadens the levy’s mandate beyond construction to include rehabilitation works and the safety and economic regulation of railway infrastructure, subject to approval by the Cabinet Secretary.
The changes come as Kenya holds talks with Chinese lenders to loosen restrictions on how the levy can be used. Mr Mbadi said the government is engaging China Exim Bank to remove a clause that requires levy proceeds to be applied exclusively to repaying the loan used to build the Mombasa–Naivasha SGR line. The waiver would allow the levy to be used as security for a bond to finance the extension of the SGR from Naivasha to Malaba.
He clarified that Kenya is not seeking Chinese financing for the Naivasha–Malaba section, but rather intends to raise funds independently using the levy as backing.
The Bill, sponsored by Majority Leader Kimani Ichung’wah, also proposes the creation of a ring-fenced Railway Development Levy Fund overseen by a dedicated board. The board would include a presidentially appointed chairperson, senior officials from the transport and Treasury ministries, the Attorney-General’s office, and five independent experts in infrastructure finance, law, investment or public-private partnerships.
