Fuel prices in Kenya may start to rise again from October. This follows a demand by the International Monetary Fund that the ongoing fuel subsidy be dropped by October.
This is part of the IMF demands that have been attached to a Sh. 270.2 billion loan IMF will be extending to Kenya.
Kenya is currently spending an average of Sh. 7.65 billion every month to caution consumers from high fuel prices. According to the Energy and Petroleum Regulatory Authority, fuel prices would be at Sh. 209.70 for a litre of petrol and Sh. 193.70 for a litre of diesel.
“The authorities intend to continue gradually realigning domestic to global fuel prices in FY2022/23 so as to eliminate the fuel subsidy by October 2022,” the IMF said in the third programme review.
“The authorities also plan to complete by end-July 2022 a review of application of Kenya’s fuel pricing mechanism and constitute a taskforce to oversee the progressive elimination of the fuel subsidy within the first half of FY2022/23 and to ensure that fuel pricing actions are at all times aligned to the approved budget (new structural benchmark).”
The government had already indicated its intention to drop the fuel subsidy, arguing that it is not sustainable.
The Treasury CS Ukur Yatani says that a gradual adjustment in domestic fuel prices will be necessary as the Treasury is no longer managing to pay fuel subsidy.
“In domestic fuel prices, gradual adjustment will be necessary in order to progressively eliminate the need for the fuel subsidy possibly within the next financial year,” he said.
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The World Bank has also expressed concerns that the issuance of fuel subsidies to oil dealers is putting a strain on the Government’s expenses and is subsequently hurting the country’s budget and planning.
“The limited pass through of higher international oil prices to consumers is generating fiscal costs, with the total monthly cost of subsidizing fuel estimated to be approximately USD66 million,” the World Bank said.
The subsidy was introduced in October 2021 through the petroleum development levy in order to cushion Kenyans from high fuel prices.