Kenya, IMF standoff looms over reinstated fuel subsidy

Wednesday, August 16th, 2023 05:10 | By
Fuel pump. PHOTO/Courtesy
Fuel pump. PHOTO/Print

A stand-off between the government and the International Monetary Fund (IMF) looms, following the re-introduction of a subsidy to hedge Kenyans from high pump prices.

Subsidies were withdrawn in September last year, at the behest of the Bretton Woods institution, terming them short-term measures that are costly, distort markets and only benefit a few people.

Indicating that authorities are back-tracking on subsidies, the Energy Petroleum Regulatory Authority (Epra) on Monday maintained fuel prices for Super, Diesel and Kerosene at Sh194.68, Sh179.67 and Sh169.482 respectively for Nairobi, even as the landed costs and total taxes and levies pointed to an increase in fuel prices.

“In order to cushion consumers from the spike in pump prices as a consequence of the increased landed cost, the Government has opted to stabilise pump prices for the August -September 2023 pricing cycle. Oil Marketing companies will be compensated from the Petroleum Development Fund,” Epra’s Director-General Daniel Kiptoo said in a statement.

The commodity landed at the Mombasa Port with an increased cost of Super at $739.09 (Sh106,281) per cubic metre, diesel at $701.99 (Sh100,946) and Kerosene at $690.58 (Sh99,305.4), meaning that without the stabilisation from Petroleum Development Fund (PDF), prices would have increased.

Echoing IMF’s decision, President William Ruto reckoned the subsidy was not sustainable and prone to abuse. The regulator had removed the subsidy on petrol but retained it on diesel and kerosene. Oil majors were to be compensated at Sh7.33 for super, Sh3.59 for diesel and Sh5.74 for kerosene from the PDF.

The country imports all its petroleum requirements in refined form and these products are traded in international markets based on a benchmark known as Platts.

Coming on the back of a Government-to-Government agreement between Kenya, the United Arab Emirates and Saudi Arabia, clearly, the deal may not lower the cost of fuel. The re-introduction of the subsidy also comes ahead of a fuel price review due in the next six months, which will have price implications in the entire fuel supply value chain.

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