Govt Spent Upto Ksh155 Million Per Day Subsidising Fuel in 2023

The Kenyan government spent an average of Ksh155 million per day subsidizing fuel prices for the last six months of 2023 - a report by the Auditor General has revealed. 

Auditor General Margaret Nyakang’o reported that oil marketing companies received Ksh27.84 billion to stabilise fuel prices that hit a record high of Ksh217.36 per litre of petrol in October 2023. 

The money was paid out to the fuel companies between July 1 and December 31st 2023.

“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 percent of the gross recurrent expenditure.” 

“The amount was spent under the State Department for Petroleum towards fuel price stabilisation,” the Auditor General told a Parliamentary committee. 

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The revelation came as a strong contrast to the public positions held by government officials led by President William Ruto who asked Kenyans to bear with the high fuel prices since his government was doing away with fuel subsidies. 

President Ruto initially told the country that subsidising fuel was equivalent to subsidising consumption which would have little benefit to the general public. 

“In addition to being very costly, consumption subsidy interventions are prone to abuse, they distort markets and create uncertainty, including artificial shortages of the very products being subsidized,” the President said in 2022. 

Fuel subsidies cost taxpayers a total of Ksh144 billion between 2020 and 2022 - Ksh60 billion of it used in the four months leading to the August General Election. 

However, in August 2023, after the cost of petrol crossed the Ksh200 mark, the Energy Petroleum Regulatory Authority (EPRA) announced that it would be subsidising the landing cost of fuel through funds drawn from the Petroleum Development Fund. At the time, a Cabinet Secretary had told the country to prepare for high fuel costs, predicting that a litre of petrol would hit Ksh260 by February 2024.

The International Monetary Fund (IMF) later criticised the re-introduction of subsidies noting that the subsidies were likely to distort the market - and further straining the National Treasury which was yet to clear about Ksh9 billion owed to oil marketing companies from previous subsidies. 

“The lengthy process in forming the task force and the publication of its decision (review of fuel pricing to ensure decisions are aligned to available funds) resulted in a delayed implementation of the structural benchmark.

“This reflects the need for internal consultation on how to finance recent domestic price decisions on October 15 and November 15 which resulted in limited but unbudgeted fuel subsidies (about 0.1 percent of GDP over the two price cycles),” the IMF warned. 

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