No relief at the pump as government plans to stop fuel subsidy

Prices of fuel may skyrocket next month following an announcement by the government of plans to halt the existing fuel subsidy.

Treasury Cabinet Secretary Ukur Yatani said the subsidy’s continuation could jeopardize Kenya’s plans to reduce debt accumulation, prompting the push to eliminate it in the fiscal year that begins next month.

“The cost of fuel subsidy could eventually surpass its allocation in the national budget thus potentially escalating public debt to unsustainable levels and disrupting the government’s plans to reduce the rate of debt accumulation,” Mr. Yatani said. “For this reason, a gradual adjustment in domestic fuel prices will be necessary to progressively eliminate the need for the fuel subsidy, possibly within the next financial year,” he added.

The government has been subsidizing fuel to lessen the burden on consumers in the wake of a global rally in crude prices. Without the subsidy, prices would have been Sh184.68 and Sh188.19 per litre of super and diesel respectively while kerosene would be selling at Sh170.37 per litre.

Since last year, the government has allocated over Sh100 billion for the programme in the 2021-22 and 2022-2023 fiscal years. Mr. Yatani said the termination of the subsidy will free up cash to subsidize fertilizers and cut prices for farmers, support the universal healthcare as well as free primary education plan.

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The announcement comes a day after the Energy and Petroleum Regulatory Authority (EPRA) increased pump prices by Sh9 pushing the cost of diesel, super, and kerosene to new highs. A litre of super and diesel now goes at  Sh159.12 and Sh140 in Nairobi respectively while a litre of kerosene rose to Sh127.94.