Maintaining fuel prices right move
The government’s decision to hold fuel prices steady is, without a doubt, a step in the right direction because it will come as a relief to consumers, who are already pressed by the rising cost of living.
Indeed, the move is a political masterstroke, coming only three weeks before the General Election. Had the prices gone up, this would have provided fodder for candidates seeking various offices, including the presidency, considering that it is easy to promise a reduction in fuel prices once there is a change of guard after next month’s elections.
What retaining the prices means, from a consumer point of view, is that the cost of goods and transport will remain constant, at least for the next 30 days until the next price review. This is what economically hard-pressed Kenyans wanted to hear.
Any increase would have amounted to a political risk, which, if unchecked, could lead to protests, similar to those held in recent weeks over the cost of food. It would have been difficult for the government to defend and increase petrol beyond the Sh200 mark, especially at a time when schools are re-opening and an election is around the corner.
However, the decision now transfers the headache to the next administration, which will find itself saddled with a huge subsidy bill at a time when revenue is constrained by a strong dollar and debt repayment.
According to a government statement, the subsidy will cost taxpayers Sh16 billion. That is a huge bill and it can only signal that the next administration already has its work cut out for it even before the first ballot is cast.
Policymakers, as a start, should consider putting in place measures that will encourage the use of alternative sources of energy, say by offering incentives for the importation of electric cars and substitution of fossil fuels in industries with solar, wind and geothermal alternatives. But this is a medium and long-term intervention.
In the intervening period, the trend in fuel prices calls for action — on the international stage — for governments to intervene and end the Russia-Ukraine conflict, which has sparked the current crisis.
Unless something is done to bring the political leaders of the two countries to the negotiating table, the rest of the world will continue to suffer the consequences of inaction by the international community.
This is a luxury that poor countries, and families, can ill afford given the myriad challenges they are facing, including drought and depressed incomes caused by the Covid pandemic.
