A senior government official said on Monday that Kenya’s government will pay subsidy arrears to petrol merchants this week in an effort to alleviate fears of impending gasoline shortages and avert a crisis.
Kenya, like other frontier countries, has been hit by a spike in crude oil prices since last year, forcing it to begin subsidizing retail prices.
In April of last year, the government of East Africa’s largest economy implemented a fuel subsidy to protect customers from rising oil prices on foreign markets.
It has spent 36 billion shillings ($313 million) on fuel subsidies so far, helping to keep prices at the pump stable and inflation within the government’s approved range.
However, according to Andrew Kamau, principal secretary in the petroleum and mining ministry, the latest increase is causing cash flow problems at some smaller fuel retailers, resulting in supply shortages. The difficulties have been exacerbated by delays in the government’s payment of subsidies to the companies.
According to Kamau, the government owes the corporations 13 billion shillings, which will be paid this week.
The relief cannot come soon enough for unhappy motorists who have been waiting in long queues at gas stations for days due to severe shortages, prompting the government to claim that it has sufficient fuel supplies.
“This is a manufactured scarcity,” Kamau explained.
On Monday morning, one customer reported she had to visit five stations around Nairobi before locating one that had fuel. She claimed that if the shortages persisted, her company would be forced to retire its vehicle fleet.
As she waited in a long line of vehicles, Evelyn Njenga, whose family owns a fleet of commercial pick-up trucks, remarked, “We will start parking the cars at home.”
Higher oil prices not only put a strain on the government’s finances, but they also drove up inflation by a half percentage point last month, frustrating authorities.
Prices at $100 a barrel are simply beyond the horizon of comprehension, said Kenya’s central bank governor Patrick Njoroge last week at a news conference, urging affluent countries to lower prices.