The Government of Kenya is now exploring changes to the value-added tax (VAT) on fuel as a measure to shield Kenyans from rising costs if tensions in the Middle East continue to push up global prices, Treasury Cabinet Secretary John Mbadi has revealed.
While speaking on Thursday before the National Assembly Departmental Committee on Finance and National Planning, The Cabinet Secretary for Treasury and National Planning John Mbadi said Kenya has 16 days’ worth of petrol stocks, 19 days for diesel and 49 days for kerosene, emphasising that any adjustment to VAT would aim to stabilise fuel prices while ensuring a steady and reliable supply of petroleum products across the country
“I’ve indicated that we are likely to adjust it, and we will present a proposal on how it is currently applied to specific areas. If we feel this is inadequate going forward, we may consider revising the VAT percentages to manage costs and ensure that prices do not rise too high, given the limited fuel cover,” Mbadi said.
He emphasised that the government is taking active measures to maintain a constant, regular and reliable supply of petroleum products in collaboration with contracted oil marketers and suppliers under the government-to-government arrangement (G-to-G).
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He noted that there are indications that the supply chain is unlikely to experience any major disruptions, ensuring accessibility and adequate availability of fuel across the country.
Mbadi urged Kenyans to stop speculating on fuel prices, warning that such actions could distort the market. He noted that the government is working to ensure there is a sufficient supply of petroleum products and that prices do not rise beyond manageable levels.
“Let them stop speculation, because we will not allow two things. First, inadequate or insufficient supply. The government is working very hard to ensure we have enough fuel. Second, prices are going where people expect. Remember, in 2024, Kenyans speculated by buying dollars at 160, thinking it would reach 200. Some of those people still hold those dollars today, but the dollar fell below 130 and has remained there. I advise anyone who wants to speculate, even motorists, not to panic or overfill. A full tank will only last a week, and then you return to normal,” he stated
“We are the ones distorting petrol prices in this country, and the government is doing everything to ensure pumps are filled, and prices are affordable. It is a difficult time worldwide; almost all countries have seen prices rise by 30 per cent. Even if prices increase here, we will use mechanisms to stabilise them. There is no need to speculate, no need to panic. We are in charge.”
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Although products destined for Kenya are loaded from petroleum terminals in Kuwait, Saudi Arabia, Bahrain and the UAE and transported via the Strait of Hormuz, which has experienced disruption, Mbadi said the crisis is not expected to have an immediate impact.
“Notwithstanding this, pump prices may not rise in the next two months as has been speculated,” he said.
He explained that suppliers contracted under the G-to-G arrangement source oil products mainly from the Middle East at import cycles of about one and a half months and have alternative loading routes
“In light of disruption of supplies routed through the Strait of Hormuz, suppliers are loading from alternative ports, for example, in Europe and India,” he said.
Citing Ministry of Energy and Petroleum data, Mbadi said that as of March 30, Kenya held 138,623 metric tons of super petrol, sufficient for 16 days; 207,841 metric tons of diesel for 19 days; and 150,398 metric tons of jet fuel to last 49 days.