(Bloomberg) -- Oil marketers in Kenya have warned of fuel shortages because of government delays in paying them the subsidies meant to keep prices of gasoline low.
The companies are owed 65 billion shillings ($542 million) for supplying fuel for the three months since June, they said in a letter to Kenya’s petroleum ministry seen by Bloomberg News. Two industry executives verified the letter but declined to comment for fear of reprisals. The firms are supposed to be repaid monthly.
“The impact on oil marketing companies is so substantial that they will face immense financial constraints to be able to continue with uninterrupted supply,” they said. “This letter therefore serves as a notification to the authorities on the imminent inability of the OMCs to meet their supply obligations unless there is prompt payment of the outstanding amounts.”
The threat of shortages comes just months after East Africa’s biggest economy suffered its worst fuel crisis in a decade, when motorists had to wait in lines for hours day and night to fill their tanks. Kenya also held a tight presidential election this month, with the result expected to be challenged, risking political unrest.
“Treasury is working on it to ensure OMCs have cash flows,” Daniel Kiptoo, director-general of the Energy and Petroleum Regulatory Authority, said by text message. Petroleum Principal Secretary Andrew Kamau and Treasury Principal Secretary Julius Muia didn’t immediately respond to calls and messages seeking comment.
Fuel Prices Rise in Kenya as It Battles Worst Shortage in Decade
The government had spent 118 billion shillings to subsidize fuel prices since April last year, the presidency said in July. It plans to end the program by December, saying the spending isn’t sustainable as debt rises.
Without the subsidy, the price of gasoline that was kept at 159.12 shillings a liter this week, would have been 35% higher. Diesel would have cost 47% more.
©2022 Bloomberg L.P.
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