The new president has been confronted with the issue of subsidy immediately he assumed office. He made the tough decision to abolish subsidies on different commodities leaving only the fertilizer subsidy aiming to subsidize production rather than consumption. The government of former president Uhuru Kenyatta used subsidy to cushion Kenyans from the high cost of unga and fuel, however,the whole subsidy program was purported to be marred with massive corruption all the better reason to abolish it. The price of unga, which is a staple food, has remained steadily above two hundred Kenya shillings while that of fuel has risen to 180 Kenyan shillings from 150 Kenyan shillings. As one would have imagine in a country of about fifty million people,most people are surprised. These are not the campaign promises issued just a few weeks back. The new president had frequently blamed the old government of the high cost of living and promise to make things better immediately after ascending to power. He said that unga would retail at seventy shillings while fuel at one hundred shillings. However,the tune has changed.
The abolition of the subsidy program has already received backlash from a section of the population. The government has been on the receiving end of the high cost of living further driven up by the abolition of the subsidy program. While abolishing the subsidy program,the head of state stated that the program has been distorting markets and was full of corruption. From his statements it is evident that the plan of the government is to leave it to the forces of the market to bring the prices such as that of fuel down. Only time will tell if that will happen. Some people in the higher echelons of power are purporting that government is hoping for the upcoming harvesting seasons mostly in the North Rift to flood the market with maize and consequently lower the prices of unga. It remains to be seen whether that will happen but most people are not optimistic the situation will turn around. The argument is that the prices of fuel might not come down anytime soon since the global prices are above the roof. The prices have been skyrocketing since the Russian invasion of Ukraine back in February. The war and the subsequent sanctions that followed further pushed the prices up. The lack of optimism is reinforced by the fact that the country depends on imported fuel which is affected by geopolitical turbulence. It might not come down until the geopolitical turbulence is calmed and no one knows when this might be. The government might have to rethink it’s stance on the whole subsidy issue.
The International Monetary Fund has been for the past few months pilling pressure on the government to abolish the subsidy program so as to be given another loan to prop it up. Apparently,the government is broke and the economic situation is dire ana financial bailout is urgently needed. The constant pressure from the IMF might have been the main reason why the government abolished it’s subsidy program. The debt crisis is already choking the country and it will be harmful to the economy if more loans are to be taken. However,the quandary here is where the government will get funds for day to day operations. The government is already between a rock and a hard place. It will be seen how the political and economic think tanks will come up with viable programs to help move the country forward economically.
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