Monday, August 15, 2022

Government now owes oil marketers Sh. 39 billion in unpaid subsidy

The amount of money the government owes oil marketers in unpaid subsidy has increased to Sh. 39 billion.

This unpaid bill is from June 2022 and cover the June-July and July-August fuel review period.

Out of the unpaid money, the compensation for diesel is the largest at Sh. 25.28 billion. Petrol is second at Sh. 12.9 billion while kerosene is third with an unpaid bill of Sh. 1.46 billion.

In June, the National Treasury asked Kenyans to start prepping themselves for higher prices as it was struggling to keep up with subsidy payments.

“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,” National Treasury Cabinet Secretary Ukur Yatani said.

The subsidy was introduced in October 2021 through the petroleum development levy in order to cushion Kenyans from high fuel prices.

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The International Monetary Fund has already demanded for the ongoing fuel subsidy to be dropped by October 2022.

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).”

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