NAIROBI, Kenya, Jun 22 – Jubilee Party Vice Chairperson David Murathe has backed Treasury’s planned move to abolish the fuel subsidy noting that it has been expensive for the government to maintain.
In his defense, Murathe pointed out that the removal of the subsidy will go a long way in remedying some of the country’s problems.
“The subsidy has been the cause to some of our problems because this is the only government in the region that has been subsidizing the consumer. Now, what happens in terms of those subsidies is that the gap between the gap between the landed cost of petrol and the prices of the consumer is actually paid by the government,” he said during an interview on NTV on Wednesday.
He stated that it benefits Kenyans better “to have expensive fuel that none at all”.
The government in October 2021 set aside Sh100 billion to the fuel subsidy kitty to help cushion Kenyans from the high cost of living and the spiraling prices in fuel prices.
As of June 30, 2022, the Ministry of Energy projects that it would have utilized Sh84 billion.
Treasury Cabinet Secretary Ukur Yattani last week on Wednesday said that plans are underway to gradually adjust domestic fuel prices saying that the move is necessary in order to progressively eliminate the need for the fuel subsidy, possibly within the next Financial Year.
CS Yattani stated that that this will help create the fiscal space necessary for the government to support targeted public spending on productive sectors that support the most vulnerable, such as fertilizer subsidies, universal health coverage, and subsidized primary and secondary education, among others.
“The cost of the fuel subsidy could eventually surpass its allocation in the National Budget, thus potentially escalating public debt to unsustainable levels and disrupting the Government’s plans to reduce the rate of debt accumulation,” he said.
Treasury’s plea mirrors concerns from the World bank that the issuance of fuel subsidies to oil dealers are putting a strain on the Government’s expenses.
While it did not propose any interventions to rid the subsidies, World Bank said, “fuel subsidies are hindering the fiscal performance which benefitted from strong economic recovery aided by the improved service sector and increased revenue.”
In their latest review, the on fuel prices effected on June 14, the Entergy Petroleum and Regulatory Authority (EPRA) increased the price of the precious commodity by Sh9, marking another record high after consistent increments averaging Sh5.
In Nairobi, a liter of petrol retails at Sh159.12, diesel Sh140.0 and Sh127.94 for kerosene.
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