Third Eye

Fuel price changes will harm economy

Thursday, September 16th, 2021 00:00 |
A fuel station attendant refills a car. The high fuel prices have been blamed for the rising cost of living. Photo/PD/FILE

Kenyans’ outrage after fuel prices were raised by at least Sh7 a litre on Tuesday should sound as a  warning shot to the government.

The historic surge will put instant pressure on most sectors of the economy, with the common mwananchi taking a serious beating.

Unpredictable nature of the price increase makes planning for businesses and even households difficult and erratic.

That means there is need to recalibrate fuel costing to make it friendlier to Kenyans.

As a result of the increase, the country is now bracing itself for tough times ahead with prices of food and transportation expected to follow suit.

Kenyans will pay an extra Sh13 per litre of kerosene, the main energy source in majority low income homes, a move likely to spike the rate of inflation.

With the cost of electricity and transport increasing, manufactured goods will be more expensive as will the cost of operating agricultural machinery that will then increase the cost of agricultural produce.

Unfortunately, projections indicate that global oil prices are likely to continue going up as demand for the commodity peaks amid a cut in production.

This means the cost of living in importing countries like Kenya will rise further.

Add the taxman’s penchant for raising taxes and the future looks more bleak.

Kenya Revenue Authority intends to increase excise duty for various products to cover the 2020/21 inflation. This will further affect the cost of fuel and other products.

The national Treasury and the Ministry of Energy ought to find a lasting solution and stop passing increased costs on to mwananchi.

If the Stabilisation Fund, which has been used in the past couple of months, is not keeping rates steady, let it give way to better instruments.

Getting a tangible solution is important since the confusion in the supply chain is not only increasing costs unnecessarily but also killing investments leading to job losses that make it difficult for the taxman to achieve revenue.

While at it, experts should ensure that reforming the electricity cost structure must include transparency in pricing to improve overall efficiency.

The reality is that for an economy that contracted by -0.3 per cent in 2019, it does not need distractions such as this fuel inspired inflation.

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