President Ruto says the subsidies are expensive and prone to abuse, including creating artificial shortages of subsidized products.
Kenya scrapped petrol subsidies a day after new President William Ruto said the subsidies were unsustainable, in a move that could put further pressure on inflation.
Some of the key challenges facing the new president include reducing high fuel and food costs in East Africa’s most dominant economy. But he will also have to grapple with subsidy measures that policymakers warn could empty the country’s coffers – and inherited debt from his successor, Uhuru Kenyatta.
In a speech following his swearing-in ceremony on September 13, Ruto said subsidies are expensive and prone to abuse, including creating artificial shortages of subsidized products. .
Late Wednesday, the Oil and Energy Administration set new, higher fuel prices for gasoline, diesel and kerosene, the types commonly used by many households for cooking.
Petrol rose 13%, diesel up 18% and kerosene up 16% from a month earlier.
The regulator removed the subsidy on gasoline, but kept it in place for both diesel and kerosene, arguing that those prices could rise even higher.
Analysts say fresh increases are likely to push inflation even higher, from a five-year high of 8.5% in August.
Like elsewhere in the world, inflation in Kenya has accelerated, mainly due to the impact of rising crude oil prices. It stands at around 5% in early 2022.
In June, the Treasury said Kenya could run out of funds to subsidize fuel costs if prices continue to rise, pushing public debt to unsustainable levels.
Aly-Khan Satchu, an economic analyst and CEO of investment consulting firm Rich Management, said: “The current government is in the midst of a rock and a tough place.
“What we’re seeing here is that instead of being shocked and scared to lift all of the subsidies right away, they’re doing it in a more phased manner.”
