East African governments are facing increasing pressure to either abolish or lower fuel taxes to cushion citizens from a high cost of living triggered by the ongoing military conflict in the Middle East which has adversely disrupted global oil supply, leading to a surge in the pricing of the precious commodity.

 

The US-Israel war on Iran which began on February 28 has, indeed, destabilised the fiscal positions of many governments globally and largely the oil importing nations.

East African governments—being oil importers— have borne the brunt of the rising crude price and have successfully passed on the cost to consumers through high retail prices, sparking public outcry.

Fuel taxes represent a substantial component of the final pump price, contributing to government revenues in East Africa.

While the Middle East crisis has increased the landed costs of fuel at the regional ports, households and businesses are concerned that the high retail prices of fuel in the region is largely as a result of several domestic taxes imposed on fuel by governments to fund their persistent budget deficits.

In Kenya, about 50 percent of the price of fuel at the pump consists government taxes, a situation that has been compounded by the imposition of 16 percent value added tax on the commodity and an increase in the road maintenance levy on fuel from Ksh18 ($0.13) per litre to Ksh25 ($0.19) per litre.

The historic jump in the retail price of super petrol and diesel in the latest monthly review on April 14 has caused public outcry with the transport industry immediately hiking their prices by close to 30 percent.

President William Ruto has been forced to swallow humble pie, directing a legislative change to reduce VAT on fuel by 50 percent from 16 percent to eight percent for a period of three months, though the cabinet secretary of the National Treasury has been granted the latitude to extend the period for a further 90 days after the initial stipulated period depending with the prevailing fuel situation both locally and globally.

The Bill was introduced in the National Assembly on April 16, 2026, considered and passed by the House on the same day without amendments. It provides for the reduction of the VAT on petroleum products by 50 percent from the current 16 percent to eight percent“The proposed reduction will be in operation for a period of ninety days. To cater for any need that may arise after the initial period, the Bill additionally empowers the Cabinet Secretary to extend the operation of the reduction for a further period of ninety days,” the Bill says.

The reduction of the VAT on fuel is expected to lower the price of super petrol by Ksh9.37 ($0.072) per litre and diesel by Ksh10.21 ($0.079 per litre.

Upon assent to the Bill by the president, the reduction of the rate of VAT for petroleum products will be deemed to have commenced on Wednesday (April 15, 2026).

In Kenya there are nine distinct taxes and levies imposed by the government on fuel. These VAT, excise duty, Road Maintenance Levy (RML), Petroleum Development Levy (PDL), Petroleum Regulatory Levy, Railway Development Levy (RDL), Anti-Adulteration Levy, Merchant Shipping Levy and Import Declaration FeesIn Uganda the government generally does not charge Value Added Tax (VAT) on petrol and diesel but instead heavily utilises excise duty on fuel to manage pricing and tax collection, which frequently keeps final pump prices lower than those in Kenya.

As part of the proposed Excise Duty (Amendment) Bill 2026, Uganda is planning to increase excise duty on diesel and petrol by Ush200 ($0.05) per litre to raise government revenue but faces criticism for potentially accelerating inflation and increasing the cost of living.

Uganda Manufacturers Association has rejected the proposal describing the timing as dangerous given the ongoing war in the Middle East that has led to a hike in prices of fuel across the world.

While Uganda does not impose taxes on fuel imports from foreign countries, local taxes and logistics costs (often via Kenya) contribute to the final price.

In Tanzania, fuel taxes are a significant component of pump prices, featuring a standard 18 percent VAT on Mainland Tanzania, with the government facing pressure from opposition politicians and MPs to reduce fuel tax rates, as high prices contribute to inflationary pressures.

The opposition party Chadema has presented a detailed economic analysis challenging the government’s narrative that the crisis is solely an external shock calling for immediate tax relief, temporary subsidies, emergency planning to prevent food shortages, and price controls.

The opposition’s analysis revealed that for every Tsh100 ($0.03) spent on fuel, Tsh31 ($0.01) goes to government taxes, levies, and duties. While the Free on Board cost and freight insurance total around Tsh2,100 ($0.8) per litre, the final pump price is inflated by 18 different charges, including excise duty, fuel levy, and railway levy.

The opposition party noted there is approximately Tsh400 in excise tax on petrol, Tsh300 in excise duty, Tsh500 ($0.19) in fuel levy, Tsh300 ($0.11) as the Oil Marketing Company margin, and Tsh170 ($0.06) as the retail margin, with additional railway levies and other charges adding to the burden.

In Rwanda, fuel taxes consist of an 18 percent VAT, road maintenance levy and excise duty.

The Rwanda Revenue Authority (RRA) oversees these taxes, which are crucial for revenue, often representing significant portions of fuel costs.

As of April 17, 2026, petrol prices in Rwanda increased to rwf2,938 ($2) per litre, while diesel was held at rwf2,205 ($1.5) per litre to support transport stability.

Rwanda reintroduced Value Added Tax (VAT) on fossil fuels, effective July 1, 2025, as part of its fiscal policy to increase domestic revenue, with the decision leading to higher pump prices for petrol and diesel, with the tax applying to fuel consumption.

Burundi charges VAT on petroleum products, usually at the standard rate of 18 percent.

While specific tax exemptions exist for some sectors, fuel has historically been a taxed commodity in Burundi, often subjected to VAT on top of other duties.

Kenya has raised fuel prices to the highest level in East Africa, sparking debate over whether neighbouring countries will follow suit. The latest increase has reignited questions among Kenyans about whether Nairobi consistently charges more than its peers, including landlocked countries that depend on imports through Mombasa port.

The Energy and Petroleum Regulatory Authority (Epra) cited surging global prices and supply shocks in the Middle East as justification for the hike. Super Petrol rose to Ksh197.60 per litre ($1.53), diesel jumped to Ksh196.63 per litre ($1.52) in Nairobi. Kerosene remained unchanged at Ksh152.78 ($1.18).

Each month, Epra uses a formula to set prices. This formula considers international crude oil prices, the prevailing exchange rate and local taxes and levies. Kenya’s VAT on fuel is 16 percent lower than Uganda’s 18 percent.

UgandaUganda currently has the cheapest fuel in the region, with petrol selling at Ush5,400 ($1.46) and diesel at Ush5,250 ($1.42).“Based on current surveys of Nairobi, Kampala, Kigali and Dar es Salaam, Kampala now has the most favourable pricing in East Africa,” said Peter Ochieng, a regional fuel marketing consultant.

Uganda had also raised prices recently, citing the Middle East crisis. After holding at USh5,080 ($1.37) for petrol and USh4,950 ($1.34) for diesel for over a year, pumps rose to current levels. The Uganda National Oil Company (Unoc) reassured the public that supply is “stable and secure,” with a 119-million-litre petrol vessel expected at Mombasa Port.

TanzaniaIn Tanzania, a significant difference in retail fuel pricing is the exemption from VAT imposed on petroleum products in other EAC countries.

The pricing formula used by the Energy and Water Utilities Regulatory Authority (Ewura) is based on prevailing prices benchmarked to Arab Gulf rates, monthly foreign exchange rates and supplier/freight/insurance premiums which also often change monthly on shipments destined for Tanzania ports.

Other costs added to the wholesale prices are import-related, excise duty, a petroleum fee, customs processing fee and separate fuel levies to the Road Fund, Rural Energy Agency and Tanzania Bureau of Standards. Ewura uses specific rates per litre, not ad valorem percentages, to keep government revenue level against global oil price fluctuations.

RwandaRwanda sets pump prices through a controlled system managed by the Rwanda Utilities Regulatory Authority (Rura), which reviews prices every three months. On April 6, however, Rura adjusted prices just a month after the previous review.

Petrol was set at Rwf2,303 ($1.57) per litre and diesel at Rwf2,205 ($1.57). This represented increases of 16 percent for petrol and 13.2 percent for diesel—the highest in recent years.

Before April 14, Rwanda had the highest prices in the region, reflecting its heavier import bill.

Economist Straton Habyalimana explained that prices are determined by international market trends and subsidies needed to maintain reasonable profit margins. Rwanda imports petroleum products via regional routes from ports in Tanzania and Kenya.

EthiopiaEthiopia is pursuing a greener policy compared to its peers. In Addis Ababa last week, petrol sold at ETB142.41 ($0.84) per litre and diesel at ETB163.09 ($1.04). Prices rose twice in a month following the US and Israel’s attack on Iran on February 28, according to the Ministry of Trade and Regional Integration, which sets price caps.

Recently, the government began phasing out subsidies to allow market forces greater influence. Ethiopia also became the first country in the region to ban imports of new fossil fuel cars, starting last year. The ban on fossil fuel cars marks a significant policy shift, aligning Ethiopia with greener energy goals.

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