President William Ruto ’s government has come in with a different take on subsidies, promising to eliminate them for bleeding public coffers with no benefit.
The President says the subsidies have not provided a solution to problems in the sectors they have been applied in, despite adding a burden on the government by increasing expenditures, and are prone to abuse and distort markets.
“The interventions have not borne any fruit. On fuel subsidy alone, taxpayers have spent a total of Sh144 billion, a whooping Sh60 billion in the last four months,” the Head of State said in his inauguration speech.
The President also faulted a maize flour subsidy introduced days before the August 9 elections to lower sifted maize flower prices to Sh100 for a two-kilo packet. “The programme gobbled up Sh7 billion in one month with no impact,” he said.
Experts have expressed different opinions on the new government’s shift from subsidies, but they all agree there will be pain for consumers in the short term as businesses pass on new costs.
Fuel and electricity are among products whose subsidies have been removed, with electricity prices shooting up by 15 per cent, while fuel — whose subsidy has been eliminated for super petrol and partially for diesel and kerosene — saw prices rise by between 15 per cent and 18 per cent on Wednesday.
Kenya Association of Manufacturers Chairman Rajan Shah said that, while subsidies are unsustainable in the long run, the removal of fuel subsidies should go alongside the elimination of some fuel taxes.
“We’re in support of the move. Eventually, global fuel prices will come down and they will stabilise in the country. However, as the government eliminates the subsidy, it should also reduce or eliminate some taxes on fuel, to contain the prices,” Mr Shah said.
Different sectors are calling for sector-specific solutions to cushion them from increased high prices, with matatu operators urging the government to consider a mechanism to supply cheap fuel to public transport operators.
“The government can subsidise fuel for public transport vehicles,” Matatu Owners Association Chairman Simon Kimutai said.
Former President Uhuru Kenyatta’s government spent a total of Sh67 billion in the last four months of his tenure on fuel, maize flour, and fertiliser subsidies. It has not been clear how much was spent on the maize flour subsidy programme. But some have criticised the move as one that will punish citizens.
“We’re going to get into a situation where everything will go up,” Mr Billow Kerow, a former legislator and economic analyst said.
He argued that globally, governments have a responsibility to intervene and cushion consumers when prices rise beyond certain limits.
