The government has responded to a warning issued by the International Monetary Fund (IMF) cautioning against the Ksh6.7 billion fuel subsidy adopted to cushion Kenyans against unbearable prices.
Treasury Cabinet Secretary Ukur Yatani and Central Bank of Kenya (CBK) Governor Paul Njoroge wrote to the IMF notifying it that the government will suspend the subsidy in December 2021.
IMF had warned that offering subsidies could lead to the burgeoning of Kenya’s foreign debt as the government already incurred over Ksh100 billion since 2021 to cover fuel costs. The amount, IMF stated, could rise to Ksh118 billion by June next year.
Yatani and Njoroge assured the global institution that they will form a task force to help strategize on how to gradually eliminate the subsidy within the first half of the 2021/2022 financial year.
“We request the establishment of new structural benchmarks including the complete review of how the pricing mechanism has been applied to date and publicly announce and constitute a task force to oversee the progressive elimination of the fuel subsidy within the first half of FY 2022/23 and to ensure that fuel pricing actions are at all times aligned to the approved budget,” Kenya’s letter to the IMF read.
Suspending the subsidy, experts however noted, could see fuel prices hit a record high owing to the prevailing oil crisis in the world.
The government resorted to subsidizing the fuel market in Kenya following an uproar over the high cost of living.
Fuel prices in the global market have been surging, hence affecting the local market as well.
A liter of petrol is retailing at Ksh150 in Nairobi while diesel is retailing at Ksh131.
Earlier in the year, the government had engaged fuel dealers in a series of engagements after motorists were affected by a fuel shortage.
The high price of domestic products also affects maize flour prices, with consumers having to pay as high as Ksh250.
President Uhuru Kenyatta on Wednesday, July 20, announced a raft of measures to lower the price of a 2kg packet to Ksh100.
This deal will see the government scrap the railway development levy and import declaration fee on all imported maize.
