Kenya: Costly subsidies make life affordable – but is this sustainable?

By Herald Aloo
Posted on Tuesday, 12 July 2022 16:09

March to Decry High of Living in Nairobi, Kenya - 07 Jul 2022
A Kenyans man holds a Kenyan flag during a march to decry the high cost of living on Saba Saba Day on 7 July 2022. (Boniface Muthoni / SOPA Images)

Although subsidies are supporting Kenyan citizens to navigate the cost of living crisis, a more sustainable way forward may be a reduction in taxes.

However, this is a direction that the government is unlikely to take considering huge maturing external debts, tightening fiscal policies by central banks of big economies, and pressure to fund a massive KSh3.3trn budget for the current 2022/23 fiscal year.

“The conversion of subsidies into indirect tax cuts would be an adoption of lower indirect taxes as a long-term measure,” says Mihir Dhakir, an economist. “But by resorting to subsidies, the government is clear to development partners and citizens that these are just short-term measures.”

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