Fuel prices remain unchanged as govt reinstates fuel subsidy

Fuel pump

A fuel attendant holding a fuel pump at the filling station along Kimathi Street. The government has reinstated the fuel subsidy to stabilise pump prices.

Photo credit: File | Nation Media Group

The price of fuel will remain unchanged until September 14 after the government reintroduced the fuel subsidy to stabilise pump prices with petrol, diesel and kerosene retailing at Sh194.68, Sh179.67 and Sh169.48, in Nairobi, respectively.

In a statement, the energy and petroleum regulatory authority (Epra) said that the government reinstated the Petroleum Development Fund which will be used to compensate importers of the commodity.

“In order to cushion consumers from the spike in pump prices as a consequence of the increased landed costs, the Government has opted to stabilise pump prices for the August-September 2023 pricing cycle,” the statement reads in part.

“Oil Marketing Companies will be compensated from the Petroleum Development Fund.”

The Kenya Kwanza administration had abandoned the fuel subsidy programme, citing the need to subsidise production rather than consumption, after fuel subsidies in 2022 cost taxpayers Sh19 billion a month.

Fuel prices taskforce

The government set up a taskforce to review Kenya's fuel prices and according to the International Monetary Fund (IMF) the taskforce was set up in May 2023 and is required to publish its findings by August 31.

While the IMF did not revealed the details of the taskforce's desired outcomes, it stated that its mandate was to reform fuel pricing decisions to ensure that domestic prices are at all times aligned with budgeted resources.

The IMF has in the past questioned Kenya's use of fuel subsidies, saying the intervention was wasteful and untargeted, and therefore failed to support the most vulnerable in the country.

"Despite some initial delays, a task force was established in May 2023 to review the fuel pricing mechanism and ensure that fuel pricing decisions are always aligned with budgeted resources.

"While the review of the pricing mechanism has commenced, the delays in establishing the taskforce have affected the timeline for the review of the fuel pricing mechanism. The findings of the taskforce are now expected to be publicly announced by the end of August 2023," said the IMF report following the completion of the fifth review of Kenya's current programme.

IMF data shows that between fiscal years 2021/22 and 2022/23, a total of Sh91.9 billion was spent on fuel subsidies in Kenya, with the amount being net of Petroleum Development Levy expenditure.

The data shows that a total of Sh60.6 billion was spent on subsidies in 2021/22, while Sh31.3 billion is projected to be spent on the same in 2022/23.

- Additional reporting by Julians Amboko