Kenya has spent Sh71.17 billion to subsidize diesel, super, and kerosene in the six months to June, highlighting the burden of the fuel stabilization scheme on the national budget.
While Kenya collects Sh5.40 a liter from motorists for the subsidy fund, the sharp rally in crude oil prices has forced the government to dip into taxes to ease public outrage over the high cost of living.
The World Bank says the monthly expenditure on the programme that started in April continues to hurt the budget and planning, signaling its intention to push for the scrapping of the subsidy.
The International Monetary Fund (IMF) has set a new loan condition requiring Kenya to drop the fuel subsidy programme by October, exposing motorists to a sharp rise in pump prices.
The subsidy has, however, failed to stem inflation now at 8.3 percent outside the government's preferred band of 2.5-7.5 percent on soaring food prices.
The World Bank and the IMF have gained a more significant say in government policy after Kenya turned to the multilateral institutions for concessional loans in the wake of the Covid-19 pandemic ravaging the revenues and limiting the country's access to the commercial loans market.
The costs of energy and transport have a significant weighting in the basket of goods and services, which measures inflation in the country.
Whoever takes office will have to steer a pandemic-battered economy, rising food and fuel prices spurred by the war in Ukraine, the worst drought in four decades, and soaring public debt. He also needs to decide on whether to maintain the fuel subsidy.
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