Following the government’s elimination of the fuel subsidy, petrol prices have reached a new record high.
As a result, a litre of petrol in Nairobi will cost Ksh. 179.30 from of Ksh. 159.12, an increase of Ksh. 20 per litre from the previous review on August 14.
This comes after the complete removal of fuel subsidies.
Diesel will cost Ksh. 165 starting on Thursday, up from Ksh. 140 in August, and a litre of kerosene will cost Ksh. 147.94, compared to Ksh. 127.94 previously.
Fuel and kerosene subsidies have been kept in part at Ksh.20.82 for diesel and Ksh.26.25 for kerosene.
The removal of the fuel subsidy, or the system for stabilizing the price of fuel, which had previously protected Kenyans from rising fuel costs, has been the primary cause of the huge price increases.
The removal of food and gasoline subsidies, which the new president William Ruto described as being unsustainable for both consumers and the government’s financial operations, was announced on Tuesday.
President Ruto claims that the fuel subsidies have sucked up 144 billion shillings in taxpayer money, including 60 billion in the previous four months.
“If the subsidy continues to the end of the financial year, it will cost taxpayers Ksh.280 billion equivalent to the entire national government development budget. In addition to being very costly, consumption subsidy interventions are prone to abuse, distort markets and create uncertainty including artificial shortages of the very products they seek to subsidize,” he said.
The fuel price increase on Wednesday is the biggest since the fuel subsidy program was put into place during the pricing cycle from March 15 to April 14 of last year.
The program has protected consumers from paying increased fuel prices by repaying a portion of the margins gained by oil marketing companies (OMCs) through revenue from the petroleum development levy (PDL).
However, the scheme has failed, with the government finding it difficult to pay the marketers, with unpaid arrears totaling more than Ksh.60 billion as of last month.
