• Editorial Team


Updated: Sep 14, 2018

Transport could be paralyzed this morning after the Kenya Motorists Association asked Kenyans to park their vehicles on major roads to protest an impending increase in fuel prices.

Having deferred it for two years, Treasury plans to implement a 16 per cent value-added tax (VAT) on petroleum products from September 1. The new tax will increase fuel prices by up to Sh17 per litre.

fuel pump
fuel prices in Nairobi Kenya

In the new plan, petrol prices will shoot to more than Sh131.93 in Nairobi, while diesel and kerosene will rise from the current Sh102.74, and Sh84.95 per litre, to highs of Sh119.38, and Sh98.54, respectively.

“The fuel prices are already too high and the 16 per cent is unnecessary. The ERC (Energy Regulatory Commission) have been increasing prices every month since the election. Whenever the government wants to raise money, fuel becomes their easier target,” Kenya Motorists Association chairman Peter Murima said.

The implementation of the VAT on petroleum products is part of the September 2013 reforms the

International Monetary Fund (IMF) proposed, and which was suspended for three years. It was extended by another two years in 2016, and now, the Treasury has vowed that the new tax must take effect this September — after a five-year relief. This increased tax also curbs construction in Kenya due to increased diesel prices used by excavators, graders, cranes and back hoes.

The Kenya Private Sector Alliance (Kepsa) has already warned that the planned huge price change will increase inflation by as high as four per cent.

Being the main input in the energy and construction -intensive sectors, the Kepsa said, the projected rise in pump prices would result in an increase in the cost of production manufacturing and construction of commodities by both small and big businesses, an increase in the cost of transport and an increase in the cost of household consumption of goods and services.

“This will also have a great impact on production and service sectors. The country will not attain the anticipated two-digit GDP growth, generate jobs and create wealth,” Kepsa chief executive Carole Kariuki said in a statement on Monday. The increase in fuel prices will join an already growing list of taxes that the Kepsa warned could hit investments and lead to loss of jobs.