Kenya: Fuel prices at historic high as subsidy ends

Fuel prices in Kenya have hit a historic high as the government recently discontinued the fuel subsidy, citing its unsustainability. The decision to remove the subsidy has sparked debate and analysis among experts and citizens alike. Michael Owuor, a resident fellow at the Global Center for Policy and Strategy, shed light on the situation in a recent interview with CNBC Africa. Owuor pointed out that the discontinuation of the fuel subsidy was not a sudden move but rather a culmination of discussions and agreements between the government and international bodies like the IMF. The subsidy had been deemed unsustainable for some time, leading to its eventual removal. While some have speculated about ulterior motives behind the decision, Owuor emphasized that it was a necessary step in the government's long-term economic strategy. One of the immediate consequences of the subsidy removal is the burden placed on consumers, who are already grappling with high costs of living. The absence of subsidies means higher prices for both fuel and power, creating a double blow for the average Kenyan. Despite the challenges, Owuor expressed optimism that the government would work towards mitigating these effects through initiatives aimed at cushioning consumers. In response to suggestions that reducing embedded taxes in fuel prices could alleviate the situation, Owuor explained that such changes would require parliamentary approval, which is anticipated to come into effect after the upcoming general election. The taxes on petroleum products play a crucial role in government revenue generation, making it a complex issue to address. However, Owuor proposed the elimination of the petroleum development levy as a potential solution, considering its original purpose was tied to the now-defunct subsidy program. The decision to end the fuel subsidy has undoubtedly stirred mixed reactions and concerns among Kenyan citizens. As the government navigates the economic implications of this move, the focus remains on finding sustainable solutions that balance the needs of the people with the fiscal responsibilities of the state. With careful planning and strategic measures, the hope is that Kenya will weather this period of heightened fuel prices and emerge stronger on the other side.