President Ruto off the blocks with drastic economic policy decisions, orders
Sunday September 18 2022
Kenya President William Ruto faces a Catch-22 situation in his quest to overturn some of his predecessor Uhuru Kenyatta’s policies so as to deliver on his campaign promises on the economy to bring down the cost of living.
On his first full day in office last Wednesday, President Ruto withdrew the state subsidy on petrol, cut relief on diesel and kerosene, pointing to a pending end also to the subsidy on the staple maize flour.
The fuel subsidy introduced by Kenyatta’s administration in April last year to defuse public apprehension over the rising cost of living was due to end this September 30 under conditions agreed between the Treasury and the International Monetary Fund (IMF) for a loan.
Dr Ruto, keen on stamping his authority in early days of his presidency, was quick to cut the programme, saying it had not achieved its purpose and was not sustainable.
Read: Kenya's Ruto pledges to bring down cost of living ‘in 100 days’
He has indicated preference for productive subsidies and could use part of the Ksh9.4 billion savings expected from the fuel subsidy squeeze to fund a plan to distribute 1.4 million bags of fertiliser at discounted prices to maize farmers for planting in the current short rain season.
While the government looks to the fertiliser programme to improve maize production in at least the next three months, it also has immediate concerns over the high transportation and production costs arising from the fuel subsidy cuts to deal with.
Bus operators were on Friday expected to raise fares by between 20 percent and 30 percent due to the higher cost of diesel announced late Thursday — a decision that will put more pressure on household budgets, and especially affecting urban workers most of whom will be forced to walk to work.
Transport accounts for the third highest expenditure by Kenyan households after food and housing.
A 2018 study by Deloitte found that a majority of commuters use matatu (mini bus public service transport) and boda-boda (motorbike taxis). In the capital Nairobi, 47 percent of residents prefer to walk, according to the study.
The findings of another study released early this year by the Nairobi Securities Exchange-listed company Car & General, which sells motorcyles and motorcyle spare parts, put the number of boda-boda riders at 1.2 million and the number of people whose livelihoods are supported by the business at six million.
With Dr Ruto’s subsidy squeeze setting off a significant rise in fuel prices, the boda-boda is likely to see the daily rides go down drastically, potentially causing unease in a sector that the president aggressively courted through his “bottom-up” campaign slogan.
The public disgruntlement could be even more widespread if the president’s scrapping of fuel subsidies ends up sparking drastic increases in the cost of food and other household goods.
Diesel is widely used in Kenya for transport, to power farm and manufacturing machinery, thereby determining production costs.
Read: Consumers in Kenya hit by fuel and electricity cost shocks
Kenyans have since the beginning of the year expressed frustrations over unprecedented increases in the prices of key food items such as maize and wheat flour and cooking oil, mainly attributed to global supply chain disruptions caused by the Russia war in Ukraine.
Global risk assessment firm Verisk Maplecroft early this month said that Kenya is one of the countries alongside Peru, Iran and Sri Lanka facing the threat of civil unrest over the high cost of living.