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Govt spent Sh28 billion in 6 months to protect consumers from high fuel prices

Motorists lining up for fuel (File photo)

By Bashir Mohammed | Friday, April 5, 2024

The government resorted to stabilisation measures to cushion consumers who were wary of digging deeper into their pockets.

The State paid Sh27.84 billion to oil marketing companies from the stabilisation kitty to cushion consumers from high fuel prices.

According to the Controller of Budget, Margaret Nyakang'o, who appeared before the National Assembly’s Budget and Appropriations Committee (BAC), the money was used in the last six months to December 2023.

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“This amount was spent under the State Department for Petroleum towards fuel price stabilisation,” Nyakang’o emphasised during the presentation.

“In the first six months of the financial year 2023/24, the total subsidies reported by MDAs (Ministries, Departments, and Agencies) amounted to Sh27.84 billion, representing 3.7 per cent of the gross recurrent expenditure. The amount was spent under the State Department for Petroleum towards fuel price stabilisation,” the CoB added.

The decision to dip into the stabilisation fund comes as the government aligns itself with commitments made to the International Monetary Fund (IMF), transitioning away from fuel subsidies as part of its fiscal policies centred towards economic recovery.

With the cost of fuel skyrocketing past Ksh200 per litre for the first time in September last year, the government resorted to stabilisation measures to cushion consumers who were wary of digging deeper into their pockets.

Fuel prices are also used as the benchmark for other commodities and an increase leads to an upward review of prices for the products, including services such as transport. However, recent months have seen a respite due to the strengthening of the Kenyan shilling against the US dollar, making it the best-performing currency globally.

Due to this favourable currency movement, the government opted to phase out the price stabilisation mechanism. To offset the incurred stabilisation costs, an additional charge was imposed on fuel commodities.

Apart from the existing Petroleum Development Levy and kerosene charge, the government is now collecting an extra Sh0.86 per litre of petrol and Sh4.31 per litre of kerosene.

In the latest fuel price review by the Energy and Petroleum Regulatory Authority (EPRA) on March 14, 2024, the price of petrol saw a reduction of Sh7.21 per litre, diesel by Sh5.09 per litre, and kerosene by Sh4.49 per litre.

For the period between March 15, 2024, and April 14, 2024, Petrol, Diesel, and Kerosene retailed at Sh199.15, Sh190.38, and Sh188.74 respectively.