Source: Business Insider Africa
- Fuel prices in Kenya have reached a 12-year high after a recent tax increase, causing concerns for the economy.
- The Energy and Petroleum Regulatory Authority (EPRA) raised gasoline prices by 7.4%, leading to financial burdens for motorists.
- EPRA’s failure to implement prescribed levy cuts has further exacerbated the situation, undermining the government’s efforts to alleviate inflationary pressures.
In Kenya, gasoline prices have hit a 12-year peak due to a recent tax increase, causing concerns for the country’s economy. The Energy and Petroleum Regulatory Authority (EPRA) raised the price of gasoline by 7.4% in the capital city, Nairobi, reaching a record 195.53 shillings ($1.39) per liter. Diesel and kerosene prices also soared by similar margins.
This surge in fuel costs was triggered by changes in finance legislation, including a doubling of the value-added tax (VAT) on petroleum products to 16%, which became effective on July 1. However, another issue compounded the problem as EPRA neglected to implement prescribed levy cuts.
The Finance Act of 2023 mandated a reduction in the Import Declaration Fee (IDF) and the Railway Development Levy (RDL) to cushion the impact of the VAT increase. Unfortunately, EPRA retained the IDF and RDL at their previous rates, leading to overpayment for fuel and illegal levies.
EPRA’s oversight has left Kenyan motorists grappling with higher pump prices for super petrol, diesel, and kerosene, intensifying the financial burden on consumers. The failure to implement the prescribed cuts undermines the government’s efforts to alleviate inflationary pressures stemming from the VAT increase.
These developments have not only burdened motorists but also undermined the government’s efforts to alleviate inflationary pressures and stabilize the economy. The Central Bank of Kenya may be compelled to adopt a tight monetary policy stance to address these concerns. Furthermore, the depreciation of the Kenyan shilling against the US dollar has further contributed to the challenges faced by consumers.
As fuel prices continue to surge, there is growing anxiety among Kenyans about the impact on their daily lives and the broader economy. Finding a sustainable solution to stabilize fuel prices and ease the financial strain on citizens has become an urgent priority for the government.
ABOUT THE AUTHOR: Victor Oluwole, BUSINESS INSIDER AFRICA.