Kenya spends Sh7.65bn monthly on fuel subsidy

People queuing with jerrycans at a petrol station in Eldoret town, Uasin Gishu County. PHOTO | JARED NYATAYA | NMG

Photo credit: Jared Nyataya | Nation Media Group

Kenya spends an average of Sh7.65 billion ($66 million) every month to subsidise diesel, super and kerosene, highlighting the adverse impact of the fuel stabilisation programme on the country’s revenues.

The World Bank says that the monthly expenditure on the programme that started in April continues to hurt the country’s budget and planning, signalling its intention to push for the scrapping of the subsidy.

A rally in global prices of Brent has since the start of the year strained the kitty due to the increase in compensation margins for oil dealers to keep pump prices low, prompting the government to partially withdraw the subsidy, increasing a litre of super and diesel to Sh150 and Sh131 respectively in Nairobi.

World Bank added that Kenya has spent the equivalent of 0.3 percent of its GDP since April.

“The limited passthrough of higher international energy prices to consumers is generating fiscal costs. At the prevailing prices at the time of the April price increase, petrol is being subsidised by Sh20.4 per litre, diesel by Sh27.6 per litre and kerosene by Sh26.9 per litre, and the total monthly cost of subsidising fuel is estimated to be approximately $66 million (Sh7.65 billion),” World Bank says in a note.

Since March, the government has increased pump prices at the back of a partial withdrawal of the subsidy, pointing to the struggles of sustaining the kitty meant to contain public outrage and keep inflation within the government’s preferred band.

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