Kenyans Big Losers If Fuel Prices Rise

The chaotic management of the economy under the Jubilee administration is set to sink to new low if a 16 per cent Valued Added Tax (VAT) on petroleum products is introduced now or in 2020.

After plunging the country into an unprecedented deep hole of debt amid widening fiscal deficits, the government moved to further tax fuel products in a bid to raise Sh71 billion annually. The National Treasury had not contended with the public mood which Parliament read well in throwing out the proposal which could still be implemented by default if President Uhuru Kenyatta does not assent to the changes.

The measure, which is being pushed by the International Monetary Fund (IMF) so that Kenya can keep a Sh150 billion precautionary facility, is threatening to ignite an inferno capable of crippling the economy. However, the Central Bank of Kenya (CBK) has said that the country no longer needs this facility.


With majority of Kenyans struggling to make ends meet due to high costs of living, a fuel price increase would condemn many households to a life of penury, higher transport costs and general increase in the prices of basic goods and services.

"The macroeconomics of this government have failed. The cost of living is already too high and it is the worst mistake to introduce VAT on fuel which touches on all aspects of life," said Mr Stephen Mutoro, Secretary-General of the Consumer Federation of Kenya.

Despite inquiries by TheSaturday Nation, the National Treasury opted to remain mum with principal secretary Kamau Thugge failing to return calls and respond to SMSs.


The Energy Regulatory Commission (ERC), which would adjust fuel prices taking into account the new tax, has said it is waiting for directions from the National Treasury. However, its boss was said to be out of the country yesterday and could not be reached for comment.

While the move to introduce VAT on petroleum products has received widespread opposition and condemnation, the government is determined to implement it after putting it on hold for two years. With the new tax, the government expects to increase its share of earnings from fuel from Sh40 per litre that it currently collects from petrol to nearly Sh60 per litre. This would push the cost of a litre from Sh112 to about Sh130.

Yesterday, fuel marketers were waiting for the ERC to communicate new fuel prices before making adjustments.Ultimately, conservative estimates show the government will get an […]

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