Fuel subsidy eats up Ksh.67B in 11 months

The fuel stabilization mechanism or the fuel subsidy has consumed Ksh.67 billion so far in the 2021-2022 financial year according to new disclosures by the Ministry of Energy.

Energy CS Monica Juma says the subsidy is expected to eat up Ksh.84 billion by the end of the financial year which closes on June 30 revealing public finance pressures paused by the State subsidy program.

While hinting at the winding up of the subsidy on Wednesday, the National Treasury said the subsidy had become untenable and risked draining its allocation estimated at Ksh.100 billion for both the 2021-2022 and the 2022-2023 financial years.

According to CS Juma, global shocks to commodity prices have stretched the fuel subsidy exposing Kenyans to higher fuel prices even as current prices remain comparatively cheaper compared to regional neighbors.

“The stabilization fund is still a very good insurance scheme for the nation, the challenge became that before we built sufficient capital within the fund a number of dynamics have evolved including the war in Ukraine which have set us on a path of unprecedented price increases,"”CS Juma said on Thursday.

“We are still standing at a relatively better price compared to our neighbours around us and hope that all the efforts that are going into stabilizing the world, in particular the war will come into fruition because that is how you can stabilize and provide comfort.”

Nevertheless, in spite of Treasury foreboding the end of the subsidy, CS Juma says the government will strive to maintain the subsidy at some level to continue shielding consumers from higher prices.

Even so, the government seemingly awaits for a miracle to manage the runaway fuel prices as it holds out hope for the resolution of the global volatility.

“We are at a point of such a differential that it is difficult for me to give a firm answer. This is not just a Kenyan issue, everyone across the world is struggling with this situation. We will continue to pick up the subsidy but probably not at the optimal level. It might require us to change that if the situation doesn’t improve,” added CS Juma.

The fuel subsidy stepped in on Tuesday to prevent an increase in fuel prices, higher than the Ksh.9 per litre posted in the review by the Energy and Petroleum Regulatory Authority (EPRA).

Without the subsidy, petrol would be priced at Ksh.184.68 per litre in Nairobi while diesel and kerosene would retail at Ksh.188.19 and Ksh.170.37 respectively.