President William Ruto indicated on Tuesday he will imminently drop the fuel subsidy, setting up Kenyans for higher transportation and production costs.
In his inauguration speech, the new president said the economy cannot sustain consumption subsidies in the coming months, pointing to a policy shift that may see him leave the prices of food and fuel to be determined by the market forces of supply and demand — at least in the near term.
“On fuel subsidy alone, the taxpayers have spent a total of Shh144 billion, a whopping Sh60 billion in the last four months. If the subsidy continues to the end of the financial year, it will cost the taxpayer Sh280 billion, equivalent to the entire national government development budget. Additionally, there was an attempt to subsidise Unga [maize flour] in the run-up to the election, a programme that gobbled up Sh7 billion in one month, with no impact.” President William Ruto
The removal of the fuel cost stabilisation programme could see pump prices shoot above Sh200 per litre for the first time, with the Energy and Petroleum Regulatory Authority (Epra) set to announce new monthly prices today for the period ending October 14.
Without the fuel subsidy, motorists would have paid historic highs of Sh214.03 per litre of super petrol and Sh206.17 for diesel for the current monthly pricing cycle, which is 34.6 per cent (Sh55) and 47.3 per cent (Sh66) more than the current Sh159.12 for petrol and Sh140 for diesel, respectively.
Fuel inflation was the key driver of overall consumer prices in Kenya in the past year due to higher pump prices as oil rallied after muted demand in 2020 before being overtaken by food inflation earlier this year due to below-average rainfall, which has hit agricultural output.
Read also; Kenya’s Fuel Subsidy Hits KSh71.17 Billion in 6 Months.
