Kenyans need clarity on cost of living plans


Motorists fuel at the Kileleshwa Shell Petrol Station in Nairobi. PHOTO | SALATON NJAU | NMG

The imminent removal of the fuel subsidy was expected given the commitment made to the International Monetary Fund (IMF) by the former administration.

President William Ruto, while signalling the end of the subsidy in his inaugural speech Tuesday, also underlined the unsustainability of such expensive consumption subsidies and their tendency to distort markets.

But for most Kenyan households, cutting the subsidy, which has eaten up Sh144 billion already, will see them suffer higher transportation and consumer costs.

So the fact that Dr Ruto didn't indicate the policy direction he will take in lowering the cost of fuel, which is partly driven by global factors, will make them anxious.

Fuel inflation has been the key driver of overall consumer prices in the past year due to higher pump prices as oil rallied after muted demand in 2020. But it was overtaken by food inflation earlier this year due to below-average rainfall, which has hit agricultural output.

The Covid pandemic, the impact of the Russian invasion in Ukraine on global supply chains, and poor weather for our rain-dependent agricultural sector have compounded difficulties for Kenyans as food prices become unaffordable to most households.

The failed maize subsidy led to a shortage of the flour staple, and the cost has remained high at an average of Sh200. All this appears to make some interventions targeting the most vulnerable in society necessary.

Cutting subsidies may also weaken growth as they drive production costs high, which reflect in high consumer prices. However, discontinuing them is also favourable to the economy.

Kenyans expect clarity from the new administration on how it intends to address these challenges.