Government is subsidising the price of fuel to shield Kenyans from the rising global price of oil.
However the state is failing to pass on the subsidy to the oil marketers who operate fuel stations in Kenya. They have paid only five months since July 2020 and now owe the oil marketers Sh15 billion.
On Sunday, the Energy and Petroleum Regulatory Authority froze fuel prices for another month. Without retail price stabilisation, petrol would cost Sh143.48 per litre in Nairobi, according to Epra, compared to the present price of Sh. 129.72.
So the Treasury is incurring huge unaffordable debts to reduce the price of fuel in Kenya by just nine percent. Is it worth it?
In the long run, subsidies are unsustainable. In recent years, there have been riots in Indonesia, Haiti, Sudan, Nigeria, Ecuador and Iran when the government tried to eliminate fuel subsidies. Kenya should avoid going down that road where there is no clear economic benefit.
It is painful for Kenyans to pay the full world price of fuel today but it is better to adjust to it sooner rather than later.
Quote of the day: "Nothing is as permanent as a temporary government program."
Milton Friedman
The American economist, academic and Nobel Prize laureate died on November 16, 2006
