President William Ruto’s plan to fully scrap fuel subsidies will face major headwinds after the world’s top oil-producing countries agreed to deeply cut exports to prevent erosion of revenues.
A group of 23 oil-exporting countries, commonly known as Opec+, on Wednesday, reached a deal to slash production by two million barrels per day, a move targeted at pushing prices per barrel back to $100 per barrel for the first time since July.
The partnership, which includes a 13-member Organisation of the Petroleum Exporting Countries (Opec) like Saudi Arabia and allies like Russia, said the decision was aimed at stabilising prices.
The decision by Opec+ countries has reduced the expectations of lower fuel prices in coming months, a projection that partly informed Kenya’s decision to remove subsidy on petrol last month.
There was hope that the drop in global fuel prices might start filtering through the economy. Net importing countries like Kenya had been hoping for more relief, particularly with the removal of the subsidy programme, But now the price drop might not be as significant as expected.
The Treasury has booked a revenue loss of Sh53.87 billion in three years following an order by retired President Uhuru Kenyatta to halve value-added tax (VAT) on fuel products in an effort to reduce the rising cost of living.