Nairobi — The fuel stabilization fund has been allocated an additional Sh49.2billion after President Uhuru signed the second Supplementary Appropriation Bill of 2022(Supplementary budget) into law.
The increased allocations will supplement the Sh34billion allocated to the fund in the first supplementary budget in April.
The supplementary budget Bill of 2022 makes available a total of Sh88.8 billion for government expenditure on public services with the fuel subsidy program getting the lion's share.
Other uses of the funds include drought mitigation interventions such as provision of relief food; the national fertilizer subsidy programme; settlement of ongoing road construction bills which has been allocated Sh26.7billion; and social protection and safety net measures assigned Sh1.5 billion.
The fuel subsidy program was introduced in October 2021 to cushion Kenyans from high fuel prices amid increased global oil prices.
According to the Ministry of Energy, the government so far has disbursed Sh67billion to the stabilization fund.
Speaking during a sustainable energy conference in Naivasha last week, Energy CS Monica Juma said the subsidy is expected to eat up Sh84 billion by the end of the financial year which closes on June 30 revealing public finance pressures paused by the State subsidy program.
"We are still taking on some stabilization as government, but it will be difficult to sustain it to the extent we have been in the future," said Juma.
Meanwhile, the National Treasury is fronting a gradual adjustment in fuel prices so as to eliminate the fuel subsidy.
The exchequer, in a statement released last week, noted that the subsidies are inefficient and often lead to misallocation of resources and crowding out of public spending resulting in unintended consequences such as disproportionately benefiting the well-off.
In the 2022/23 financial year, Treasury allocated the fuel stabilization fund Sh24.7billion.
This is Sh7billion lower compared to the Sh31.7billion allocated for the financial year ending June 30, setting the stage for costlier fuel in an environment where global costs of crude are projected to close the year at $104 per barrel.
