By Antony Mutunga
For about two months now, Kenyans have faced a fuel challenge that saw many forced to abandon using their private vehicles to prolonged queues at petrol stations as the majority on the road lined up to refuel where they could. The issue that started with holding out for fuel prices to rise seems to be far from over as the World Bank cast doubt on whether the Kenyan government would be able to sustain its current fuel subsidy programme if the Russia-Ukraine conflict was to continue.
According to its 2022 Africa’s Pulse Report, Boosting Resilience: The Future of Social Protection in Africa, Fuel subsidies in Kenya have contributed to stopping fuel prices from rising. This has been successful so far, but it will pressure public finance if the war continues. The conflict is expected to exert more pressure on government spending in non-resource-rich countries, especially those with fuel subsidies. Apart from Kenya, other countries to be affected include Nigeria and Ethiopia. It is believed that the high cost of fuel subsidies associated with the surge in fuel prices may deteriorate the country’s fiscal balance.
In Kenya’s case, the government set aside Sh25 billion for the fuel subsidy programme in the current financial year in the Supplementary Budget; however, the Ministry of Petroleum and Mining states that the financial resources it collects through the Petroleum Development Levy, which is channelled to the stabilization programme, is not enough to sustain the subsidy. If the conflict continues, the country will eventually increase fuel prices, further affecting inflation.
According to the World Bank, crude oil and natural gas prices increased by 39% and 31% from January to March 2022. The Bretton Woods institution warns that high fuel and food prices will continue to affect consumer inflation across several countries in the Sub Sahara
Africa region.
To avoid the recent fuel crisis that hit the country, whereby traffic in parts of the capital Nairobi came to a standstill as desperate motorists joined snaking queues outside petrol stations, the government must implement short-term policies to mitigate the impact of fuel prices on the vulnerable segments of the population, and sustain the economy. (
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