Treasury grants Sh60bn subsides in six months

National Treasury and Economic Planning Cabinet Secretary Prof Njuguna Ndung'u

National Treasury and Economic Planning Cabinet Secretary Njuguna Ndung'u.

Photo credit: Diana Ngila | Nation Media Group

 The government spent Sh60.12 billion in subsidies on fuel, electricity, fertiliser, food, and other commodities in six months to cushion consumers from a high cost of living that rose fastest in five years in the second half of last year. 

The half-year expenditure is more than double the Sh22.23 billion that the Treasury had budgeted to spend on giving consumers a temporary buffer between high commodity prices in the full financial year 2022/23.

Data from the Treasury shows that the government had spent Sh43.91 billion between July and September before the expenditure rose by Sh16.21 billion between October and December to Sh60.12 billion.

This came on the back of high inflation, which hit a five-year high of 9.58 percent last October before easing for three months in a row to nine per cent in January on the back of monetary policy tightening by the Treasury.

Part of this spending includes Sh4 billion that was paid to maize millers by the Uhuru Kenyatta administration for a short-term maize flour subsidy programme that ran between July and August to lower prices.

Ruto: We have saved huge amounts of money by removing subsidies

The outlay also includes billions of shillings paid to oil marketing firms in subsidy to keep fuel prices stable even as the State seeks to withdraw the subsidy to keep spending in check.

Treasury Cabinet secretary Njuguna Ndung’u said the withdrawal of the subsidy will allow the government to only continue the subsidy on fertiliser to boost local maize production.

In the first supplementary budget for the fiscal year 2022/23, the Treasury has added the State Department of Crop development Sh25.1 billion taking its budget to Sh66.61 billion from original estimates of Sh41.5 billion.

The additional funding is to cater to the fertiliser subsidy for both the short and long rains planting seasons.

“The government will eliminate the remaining unsustainable and consumption-driven fuel subsidy by end of December 2022, but will continue to offer support to agricultural production through the fertiliser subsidy programme,” said Prof Ndung’u.

The subsidies have been pivotal by keeping the cost of fuel stable thus helping to prevent a sharper increase in the cost of transport, agriculture, electricity, and manufacturing.

For instance, when the government last September withdrew a nine-month-long subsidy on electricity, prices rose sharply with the fuel cost charge (FCC), which is the second most expensive component of electricity, rising by 46.6 per cent.

The government has also said that its subsidy on fertiliser cut prices from Sh6,500 to Sh3,500 helping farmers to access the key agricultural input much more cheaply.