The government is set to phase out the fuel subsidy by the end of December this year.
A new report by the International Monetary Fund (IMF) shows Kenyan authorities have detailed a proposed plan to withdraw the fuel price cushioning measure.
The fuel subsidy phase-out is part of interventions to ease fiscal pressures created by the fuel price stabilisation mechanism.
“We request the establishment of new structural benchmarks including the complete review of how the pricing mechanism has been applied to date and publicly announce and constitute a taskforce to oversee the progressive elimination of the fuel subsidy within the first half of FY 2022/23 and to ensure that fuel pricing actions are at all times aligned to the approved budget,” Kenya told the IMF in a letter undersigned by CBK Governor Patrick Njoroge and Treasury Cabinet Secretary Ukur Yatani.
IMF welcomed the phase out of the fuel subsidy but recognized it could be staggered in case international fuel prices continue to rise during the period.
The IMF report also shows the fuel subsidy has consumed an average of Ksh.10 billion a month with the monthly allocation to the fund standing at Ksh13 billion in June.
According to IMF estimates, since July of 2021, the fuel subsidy has eaten up an estimated 0.5 per cent of Kenya’s GDP.