Kenya changes stance and reintroduces a fuel subsidy

In a reversal of government policy prompted by public outcry over the high cost of living, Kenya has reintroduced a minor subsidy aimed at maintaining stable retail fuel prices for the next 30 days, country’s energy regulator said on Monday.

Upon assuming office in September of last year, President William Ruto eliminated fuel and maize flour subsidies that had been implemented by his predecessor.

The decision was also intended to reduce government expenditures, given its efforts to manage debt repayments. These repayments have led the government to reject market speculation concerning a potential default.

However, the reduction in subsidies and recent tax increases have elevated living expenses and played a part in triggering violent anti-government demonstrations in recent months.

The energy regulator stated that the highest retail price for a liter of petrol would remain steady at 194.68 shillings ($1.35), protecting consumers from a rise of 7.33 shillings. The government will absorb this increase through a price stabilisation fund.

Retail fuel prices are determined in the middle of each month. The government has also implemented minor subsidies on kerosene and diesel, energy regulator EPRA said on Monday.

The action taken by the regulator did not constitute a revival of the subsidies, as clarified by Daniel Kiptoo, the director general of EPRA. Instead, the petroleum development levy was utilized to stabilize prices, without requesting financial support from the exchequer.

“We are essentially redistributing the funds we’ve accumulated over the past few months to benefit Kenyans,” he told media, explaining that this involves the levy, which is levied at a rate of 5.40 shillings per liter of fuel.

After the subsidies were removed by Ruto, fuel prices experienced a significant increase. They surged once more in July following the government’s successful passage of a controversial law in parliament, which resulted in doubling the fuel tax.

The protests triggered by that legislation were halted last month when the opposition and Ruto reached an agreement to engage in discussions aimed at resolving their disagreements, marking the second such effort this year.

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