Central Bank of Kenya (CBK) Governor Dr Patrick Njoroge projected that fuel prices will drop by December despite President William Ruto ending the subsidy.
Speaking on Monday, September 19, during the Members of Parliament (MPs) induction, Njoroge explained that while the cost of fuel in the international market had hit a record high the cost had begun dropping.
He attributed this drop to the resumption of relative normalcy in the countries that produce oil.
"It had gone as far as Ksh15,662 (USD130) per barrel in March and has come down to Ksh11,204 93 (USD93) dollars per barrel. The expectation is that this will come down even more to the point that we will not have to have the subsidies.
"It is true that we eliminated the subsidies on the super petrol but on all the other products. We have the prices coming down and therefore the gap is narrowing, so the pressure on the consumer and govt becomes less and less," Njoroge stated
The CBK boss further explained why the cost of cooking oil had not dropped despite the global price reduction. He elucidated that importers of palm oil were met with a high inflation rate, which he pegged to the cost of oil.
He added that while the regulator will execute its mandate by trying to regulate inflation, a more permanent solution will be realised when the cost of fuel drops.
"There have been changes in the price of fuel, which will push inflation higher. But that is well within our scope and we will not let it go on and on."
"Since June, the global prices of a lot of things have begun to come down and we expect that by December, we will have much better landed prices," he stated.
The Governor agreed with President William Ruto that subsidies were detrimental to the economy, but may also affect inflation in the country. He also called for stakeholders to strike an equilibrium between the pros and cons.
"It is true as the President said that any subsidy is a cost in the sense that somebody needs to be taxed to cover that subsidy. But on the flip side, when removed, prices will rise and that will be reflected in inflation - a balance needs to be struck," he said.
Njoroge stated that while the country's inflation stands at 8.5 per cent, he explained that more developed countries grappled with high rates including America at 8.3 per cent and the United Kingdom at 9.9 per cent.
