•Poor households who use kerosene for cooking and lighting are the most hit in the latest developments as a litre increased by Sh15.19.
•The Consumer Federation of Kenya has warned of an imminent rise in the cost of electricity, transport, food, health and education.
Majority of Kenyan households are staring at a sharp increase in the cost of living, as the government caves in to the International Monetary Fund conditions on fuel subsidies.
Consumers on Monday woke up to a sharp increase in fuel prices, in a delayed announcement by the Energy and Petroleum Regulatory Authority (EPRA) minutes to Sunday mid-night.
Poor households who use kerosene for cooking and lighting are the most hit in the latest developments as a litre increased by Sh15.19.
That of Super petrol has increased by Sh3.40 per litre while diesel, widely used in agricultural activities, transport, power generation and manufacturing has gone up by Sh6.40, as pump prices hit a historic high.
A litre of petrol, diesel and kerosene in Nairobi is now retailing at Sh182.70, Sh168.40 and Sh161.13, respectively, up from Sh179.30, Sh162 and Sh145.94.
They are expected to mostly hit poor homes as Kerosene use for cooking remains prevalent in urban low-income areas, with an estimated 1.7 million households in Kenya or 14 per cent of the total population cooking with kerosene.
The latest Kenya Cooking Sector Report indicates at least 27.7 per cent of these are urban households and 3.2 per cent are in rural areas.
Last year, domestic annual average price of illuminating kerosene recorded an increase of 27.1 per cent to Sh127.38 per litre, the Economic Survey indicates.
This comes as the government ends the fuel subsidy programme, which has been in place since April 2021, supported by funds from the Petroleum Development Levy to cushion consumers from high pump prices.
It has been drawing at least Sh7.65 billion monthly to compensate Oil Marketing Companies’ margins.
“The subsidy on diesel and kerosene has been removed,” EPRA director general Daniel Kiptoo said in a statement.
The higher pump prices are despite decreases in the landed cost of diesel and kerosene in the month of April.
According to EPRA, average landed cost of diesel decreased by 2.51 per cent from $705.82 (Sh96, 767) per cubic metre to $688.07 (Sh94, 334), while kerosene decreased by 1.13 per cent from $707.53 (Sh97, 002) to $699.54 (Sh 95,906) per cubic metre.
The average landed cost of imported super petrol however increased by 8.63 per cent from $666.51 (Sh91, 378) per cubic metre in March, to $724.01 (Sh99, 261).
The prices are inclusive of the eight per cent VAT and the revised rates for the excise duty adjusted for inflation.
They are expected to further increase if VAT goes up starting July 1.
National Treasury in the Finance Bill 2023 has proposed VAT on fuel be revised upwards to 16 per cent, a move that throws out President William Ruto's campaign promise of lowering the high cost of living by fixing heavy taxation on Kenyans, whom he said were being overtaxed.
The government is under pressure to raise more revenue to tame borrowing in the wake of a ballooning debt, whose repayment continue to consume most of the taxes.
Ruto has termed subsidies as ‘unsustainable” as they eat into the much needed revenue.
The government is however seen to finally be towing to IMF’s conditions to increase revenue collections, with fuel being a major component as it hosts up to nine different taxes and levies.
They include Excise Duty, Road Maintenance Levy, VAT, Petroleum Development Levy, Petroleum Regulatory Levy, Railway Development Levy, Anti-adulteration Levy, Merchant Shipping Levy and the Import Declaration Fee.
Last year, IMF set a fresh loan condition requiring Kenya to drop the fuel subsidy programme by October.
This is under the 38-month budget support scheme, which included a $2.34 billion (Sh320.9 billion) loan package.
In November last year, the IMF staff team and the Kenyan authorities reached another staff-level agreement on the fourth reviews of Kenya’s economic program, which would see Kenya have access to SDR 336.54 million (equivalent to about $ 433 million or Sh59.4 billion).
This brings the total IMF financial support under the Extended Credit and Fund Facility arrangements to SDR1, 202.31 million (equivalent to about $1,548 million or Sh212.3 billion).
According to IMF, The Kenyan authorities are “taking forceful measures to further reduce the fiscal deficit,” including eliminating fuel subsidies and the variable cost adjustments in electricity prices.
The current fuel prices which are the highest since Kenya started regulating pump prices, are expected to trigger inflationary pressure as manufacturers and service providers factor in the increased fuel costs.
The Consumer Federation of Kenya (Cofek) has since warned of an imminent rise in the cost of electricity, transport, food, health and education, noting the price increases should have been gradual.
“We are concerned that while we do not support long-term subsidies, the steep rise in fuel prices will make the already bad economic outlook even worse. It will trigger unintended consequences,” secretary general Stephen Mutoro said.