State paid Sh28bn in six months to cushion buyers from high oil prices

The government paid oil marketing companies Sh27.84 billion in the six months to December 2023 from the stabilisation kitty to cushion consumers from high prices, the Controller of Budget Margaret Nyakang’o has disclosed.

This came after the government ended fuel subsidies in line with commitments made to the International Monetary Fund (IMF), in favour of stabilisation.

“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,” Dr Nyakang’o said in a presentation to the National Assembly’s Budget and Appropriations Committee (BAC) on budget implementation for the first six months of the 2023/24 financial year.

“The amount was spent under the State Department for Petroleum towards fuel price stabilisation,” she added. Stabilisation has proved pivotal to cushion consumers against higher fuel prices, even as prices of the commodity surged past the Sh200 per litre mark for the first time in September last year.

Read: More pain at the pump as fuel prices hit a historic high

But the strengthening of the Kenyan shilling against the US dollar – which has made the local currency the best performing globally this year – has eased fuel prices in recent months.

This has given the government room to do away with the price stabilisation. In the meantime, the government has put an extra charge on the commodity to help repay incurred stabilisation costs.

In last month’s fuel prices review, the Energy and Petroleum Regulatory Authority (Epra) reduced the price of petrol by Sh7.21 per litre, of diesel by Sh5.09 per litre, and kerosene by Sh4.49 per litre.

Besides the Sh5.40 Petroleum Development Levy that is charged on each litre of petrol and diesel and Sh0.40 from kerosene, the government is this month also collecting a further Sh0.86 from each litre of petrol and Sh4.31 on kerosene.

Without the fuel prices stabilisation, Kenyans would have been hit even harder by high market prices of the commodity.

Read: Unpaid fuel price stabilisation funds hit oil firms’ cash flows

According to the Kenya National Bureau of Statistics (KNBS), the price of kerosene has increased by 29 percent over the last year, while that of diesel and petrol has also gone up by 17.3 percent and 10.9 percent respectively.

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