Reform fuel subsidies to cushion them from politics, achieve goals
Abstract
In a free-market system like Kenya, the forces of supply and demand ought to determine fuel prices. But fuel has been a political tool in the country, often used to woo voters during elections.
Last year, for example, President William Ruto promised voters that removing the fuel subsidy would stabilise fuel prices, a concept that has proven to be economically unfeasible.
While most economists view a subsidy as a failure if it doesn't improve the overall economic performance, policymakers may still deem it successful if it serves different roles.
Many subsidies may be economic failures in the long run but still achieve political aims.
The staunchest supporters of subsidies are often those who benefit directly or indirectly, and the political temptation to appeal to special interests is a compelling incentive for Kenyan politicians and policymakers.
How do we stop this politicisation? Reforming government subsidies is a multifaceted task that demands a profound understanding of the political dynamics.