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How Kenya plans to tap fuel levy for road infrastructure

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Kenya is planning to leverage half of the proceeds of a tax imposed on fuel imports to float bonds for the maintenance, development and rehabilitation of roads, in what could be a lesson for Nigeria in managing road infrastructure.

The fuel levy is strictly for road maintenance and does not generate new capital for the development of new roads and is generated per litre of petroleum imported.

David Pkosing, chairman of the National Assembly’s transport committee, told Bloomberg that the development would help unlock the issuance of road bonds. A road bond is a collected sum of money used by a governing body to safeguard against any defects to a road that may occur during new construction.

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According to the Kenya Roads Board, which oversees the fund, the government is looking for solutions to close the gap, for the repair of the country’s road network, and the road industry needs to raise 590 billion shillings ($5 billion).

Rashid Mohamed, director-general of the Kenya Roads Board, said the amount collected from the fuel levy, which is currently charged at 18 shillings per litre of petrol and diesel with the inclusion of transit tolls, is expected to total 84 billion shillings for the fiscal year ending in June. He said 50 percent of the cash would enable Kenya to raise up to 150 billion shillings ($1.3 billion) from this.

Kenyan lawmakers approved legislation in 2019 that allows the levy to back infrastructure bonds 2019. However, issuance has been delayed by the lack of a legal framework.