In defense of himself, Murathe argued that the subsidy’s withdrawal will significantly help to solve some of the nation’s issues.
“Since this is the only government in the area that has been subsidizing the consumer, the subsidy has been the root of some of our troubles.
In terms of those subsidies, the government really pays the difference between the retail price of gasoline and the landed cost of the fuel, he explained in an interview with NTV on Wednesday.
He stated that it benefits Kenyans better “to have expensive fuel that none at all”.
The government in October 2021 set aside Sh100 billion to the fuel subsidy kitty to help cushion Kenyans from the high cost of living and the spiraling prices in fuel prices.
The Ministry of Energy estimates that as of June 30, 2022, it will have used Sh84 billion.
The decision is important to gradually eliminate the need for the gasoline subsidy, probably during the next Financial Year, according to Treasury Cabinet Secretary Ukur Yattani, who made the announcement last week on Wednesday.
According to CS Yattani, this will assist in generating the fiscal space required by the government to support targeted public spending on productive industries that support the most vulnerable, such as subsidized primary and secondary education, universal health coverage, and fertilizer subsidies, among other things.
“The cost of the fuel subsidy could eventually surpass its allocation in the National Budget, thus potentially escalating public debt to unsustainable levels and disrupting the Government’s plans to reduce the rate of debt accumulation,” he said.
Treasury’s plea mirrors concerns from the World bank that the issuance of fuel subsidies to oil dealers are putting a strain on the Government’s expenses.
While it did not propose any interventions to rid the subsidies, World Bank said, “fuel subsidies are hindering the fiscal performance which benefitted from strong economic recovery aided by the improved service sector and increased revenue.”
In their latest review, the on fuel prices effected on June 14, the Entergy Petroleum and Regulatory Authority (EPRA) increased the price of the precious commodity by Sh9, marking another record high after consistent increments averaging Sh5.
In Nairobi, a liter of petrol retails at Sh159.12, diesel Sh140.0 and Sh127.94 for kerosene.