Brace yourself for another fuel hike as subsidy set to be dropped

IMF has dropped support for the current fuel subsidy

Fuel inflation was the key driver of overall consumer prices in Kenya in the past year. Image: Nation Africa

Kenyans should brace themselves for tougher economic times after the International Monetary Fund (IMF) dropped support of the current fuel subsidy programme.

According to IMF, the fuel subsidy set to run from the financial year of 2021/2022 to 2022/2023 does not align with the Sh270.2 billion loan recently approved for disbursement.

The loan is the third instalment for Kenya under the IMF's Extended Credit Facility and Extended Fund Facility arrangements. Kenya has so far received Sh151Billion ($1.208 billion).

According to the National Treasury, the government has since April 2021, spent Sh7.65 billion monthly to subsidise diesel, super petrol and kerosene. The fuel prices are currently retailed at Sh159 for Petrol, Sh140 for Diesel and Sh127 for Kerosene.

“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,” IMF revealed when announcing the 38-month loan disbursement.

The multilateral lender also revealed plans to create a taskforce that will oversee the elimination of the fuel subsidy within the first half of the 2022/2023 financial year.

“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 announcement comes a day after President Uhuru Kenyatta issued a statement regarding the price of maize flour after a meeting between Agriculture CS Peter Munya, maize millers and other stakeholders.

President Kenyatta directed that his administration would subsidise the cost of maize flour to make millers sell the product at Sh100 per 2kg.

He appealed to millers to be cognizant of the rights of Kenyans and urged them to consider their consumers' welfare and not be driven solely by profitability.

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