The government has spent KShs. 44 Billion on stabilization of fuel prices, which the Ministry of Energy says has been funded by the Petroleum Development Levy Fund.
- In mid-September 2022 and May 2023, the government removed subsidies on all products and services including refined petroleum products, before reviving it in August 2023.
- The Petroleum Development Levy Fund is used for matters relating to the development of the oil industry including to stabilize local petroleum pump prices in instances of spikes occasioned by high landed costs above a threshold determined by the Energy Regulatory Authority.
- In a statement, the principal secretary defended the importation of refined petroleum products through a government-to-government arrangement which came into effect in April 2023 and provides extended credit terms of 180 days.
“Under the Kenya Kwanza Government, a petroleum pump price stabilization framework has been put in place and all the expenditure the Government incurs in petroleum pump stabilization is self-funded from the Petroleum Development Levy Fund,” Mohamed Liban, Principal Secretary, Ministry of Energy and Petroleum said. According to Liban, the previous government had spent KShs. 144bn on fuel subsidies.
He highlighted that the arrangement has provided benefits to the country’s economy with regard to the USD liquidity and appreciation of the Kenya Shilling against the greenback.
“The G-to-G arrangement has realized the benefits as conceptualized and is working in cushioning the country as macroeconomics recover. This arrangement has managed to stem the slide of the shilling against the dollar,” he said, “The regulator EPRA is currently conducting a cost-of-service study for petroleum products that is currently in a draft form and is undergoing stakeholder engagement.”
In May, the National Treasury cut fuel subsidy allocations from KShs. 54.18bn in the previous financial year to KShs. 27bn this financial year. The subsidy has been a sticking point in Nairobi’s ongoing engagement with the International Monetary Fund (IMF) on structural reform. While Nairobi is eager to balance the socioeconomic and political costs of fuel prices, the Bretton Woods institution considers the subsidies unsustainable and has repeatedly issued conditions on their removal.
Currently, Super petrol retails at Sh188.84, diesel at Sh171.60 and Kerosene at Sh161.75 in Nairobi. Mombasa residents purchase super petrol at Sh185.66, diesel at Sh168.43 and kerosene at Sh158.7. In Nakuru, super petrol goes for Sh187.9, diesel at Sh171.04 while kerosene retails at Sh161.27.
