Kenya Reinstates Fuel Subsidy Amid Rising Living Costs And Public Dissent

Kenya reinstates fuel subsidy amid rising living costs and public dissent

Kenya’s energy regulator, the Energy and Petroleum Regulatory Authority (EPRA), announced a temporary reintroduction of a subsidy to stabilise retail fuel prices for the next 30 days, in light of the mounting public frustration over the escalating cost of living. This move represents a shift from the government’s previous stance on subsidies.

Last September, when President William Ruto assumed office, he had discontinued the fuel and maize flour subsidies instituted by his predecessor. Ruto’s justification for this move was his inclination towards promoting production subsidies over those on consumption.

This decision, while aimed at reducing government expenditure in the face of pressing debt repayments, has led to significant civil unrest. Denials of any potential default on their debt obligations and the removal of subsidies, combined with the recent tax increments, have escalated living expenses. This mix of economic pressures served as catalysts for several violent anti-government demonstrations in the past few months.

In a gesture to mitigate these tensions, the EPRA has declared that the maximum retail price for a litre of petrol will remain stable at 194.68 shillings ($1.35). This ensures that the consumers are safeguarded from a potential increase of 7.33 shillings per litre, a burden that the government will now bear through its price stabilisation fund.

It is noteworthy that fuel prices are adjusted midway through each month. Apart from petrol, the government has also sanctioned slight subsidies on diesel and kerosene, as highlighted by the EPRA.

However, Daniel Kiptoo, the director general of EPRA, clarified that this should not be interpreted as a full reinstatement of the subsidies. Instead, the regulator will utilise the petroleum development levy to maintain stable prices rather than seek funding from the Exchequer. He remarked to Reuters, “We are basically giving to Kenyans the money that we have collected over the past couple of months,” referring to the levy imposed at a rate of 5.40 shillings per litre of fuel.

After President Ruto’s decision to eliminate the subsidies, fuel prices witnessed a significant surge. They experienced another sharp rise in July, following the government’s approval of a divisive law which doubled the fuel tax. This action had spurred organised protests, which were, however, halted last month as President Ruto and the opposition came to a mutual understanding to engage in discussions and resolve their differences.

As of now, the official stance of the energy and finance ministries on this development remains unknown since they have not commented on the matter.