Ruto’s administration puts breaks on fuel subsidy exposing Kenyans to high cost of living

Kenyan motorists are paying more for fuel after the Energy and Petroleum Regulatory Authority reviewed pump prices upwards. PHOTO | FILE

NAIROBI, Kenya - Kenyans are set to feel the bite of the high cost of living should the new administration goes ahead and drops the fuel subsidy, which was put in place by former president Uhuru Kenyatta to cushion Kenyans against the high cost of living.

In his inaugural speech, President William Ruto said that the current economic status cannot sustain consumption subsidies in the coming months.
This new policy change may now see the prices of food and fuel determined by the market forces of supply and demand.

The new president left Kenyans guessing about his 100 –days of cushioning Kenyans against the high cost of living by lowering the prices of food and transportation that have burdened Kenyans.

The removal of the fuel cost stabilisation programme could see pump prices shoot above Sh200 per litre for the first time. The cost of a two-kilogramme packet of staple maize flour meal has remained at Sh200 on average after a failed subsidy deals with millers in July.

"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," Dr Ruto said at the inauguration attended by 18 heads of government in Africa.

"The previous government has made an attempt to subsidise maize flour and fuel to cushion Kenyans. Over the last 4 months alone the government have used 151 billion in both fuel and maize flour subsidy as a way of cushioning Kenyans against the high cost of living but all these efforts have generated no impact. In the next two weeks’ farmers will have 1.4 million fertilizers available to them at low cost to help enhance food production in the food basket regions. “comments Dr Ruto.

The newly sworn-in president did reveal that the state energy agency will announce new monthly fuel prices that will come to an end mid-next month.

Before the 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.

That 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.

President "In addition to being very costly, consumption subsidy interventions are prone to abuse, they distort markets and create uncertainty, including artificial shortages of the very products being subsidised," Dr Ruto said.

The Kenya Kwanza Coalition had promised Kenyans that once they take the helm of leadership, they will relook at a number of taxes, which account for nearly half of the price of petrol, as part of their plan to lower the cost of fuel.

Dr Ruto "The cost of living challenges are related to production. Our strategy to bring down the cost of living is predicated on empowering producers," the President said. "Our priority intervention, therefore, is to make fertiliser, good-quality seeds and other agricultural inputs affordable and available."

GAROWE ONLINE