Kenyan President William Ruto faces a catch-22 situation in order to reverse some of his predecessor Uhuru Kenyatta’s policies and deliver on an economic election promise to lower the cost of living.
On his first day in office last Wednesday, President Ruto said he would withdraw state subsidies for gasoline, cut subsidies for diesel and kerosene, and end subsidies for staple food cornmeal.
The fuel subsidy, introduced by the Kenyatta government in April last year to ease public fears about rising costs of living, was discontinued in September this year under terms agreed for the loan between the Ministry of Finance and the International Monetary Fund (IMF). It was supposed to end on the 30th.
Dr. Ruto was keen to underscore his authority early in his presidency, but he quickly discontinued the program, saying it was unfulfilling and unsustainable.
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He has shown a penchant for productive subsidies, and has used fuel subsidies to fund a plan to distribute 1.4 million bags of fertilizer at discounted prices to corn farmers for planting during the current short rainy season. Some of the savings of 9.4 billion shillings expected from the compression could be used.
The government hopes the fertilizer program will improve corn production in at least the next three months, but is also concerned about high transportation and production costs resulting from reduced fuel subsidies to be addressed. .
Bus operators were expected to raise fares by 20% to 30% on Friday after higher diesel prices announced late Thursday. This decision will put more pressure on household budgets, especially affecting urban workers. walk to work.
Transport accounts for the third highest expenditure by Kenyan households, after food and housing.
A 2018 study by Deloitte found that the majority of commuters use matatu (minibus public transport) and boda-boda (motorcycle taxis). In the capital, Nairobi, 47% of residents prefer to walk, according to a survey.
A “bottom-up” promise
Another study released earlier this year by Car & General, a Nairobi Stock Exchange-listed motorcycle and motorcycle spare parts retailer, found that there are 1.2 million boda-boda riders, many of whom rely on their bicycles for a living. The number of people standing is 6 million businesses.
Boda Boda could see a significant drop in daily rides as Dr. Ruto’s subsidy cuts are causing fuel prices to rise sharply, a sector the president has aggressively appealed to through his ‘bottom up’ campaign slogan. It can cause anxiety.
If the president’s repeal of fuel subsidies results in significantly higher prices for food and other household items, public discontent could spread further.
In Kenya, diesel is widely used to power transport, agricultural and manufacturing machinery, which determines production costs.
read: Kenyan consumers hit by shock in fuel and electricity bills
Since the beginning of the year, Kenyans have been frustrated by unprecedented rises in prices of key food commodities such as corn, flour and cooking oil, largely due to disruptions in global supply chains caused by the Russian war in Ukraine. has been expressed.
Global risk assessment firm Verisk Maplecroft said earlier this month that Kenya was one of the countries facing the threat of civil unrest over its high cost of living, alongside Peru, Iran and Sri Lanka.
