IMF Opposes Extension Of Electricity Subsidy, Prices Set To Go High

The cost of electricity is set to go high as the International Monetary Fund (IMF) opposes the cheap expansion of Kenya Power subsidy.

According to IMF, the electricity subsidy has cost Kenyans over Ksh 26 billion over a one-year period starting January.

The subsidy that was effected by former President Uhuru Kenyatta is set to expire at the end of this month.

“The January tariff cut has had a significant negative impact on the company’s liquidity position, resulting in an annual loss in revenue of Sh26.3 billion,” said the IMF.

IMF has opposed extension of the subsidy, arguing that removal of the subsidy will improve KPLC’s financial condition.

“The tariff cut is set to expire at the end of December 2022, and if implemented, KPLC’s liquidity situation will drastically improve, to a point where the government of Kenya support may no longer be necessary,” IMF added.

At the same time, National carrier Kenya Airways (KQ) and electricity distributor is set to receive a Ksh 37.3 billion bailout.

The government bailout will support restructuring at the two state agencies.

KQ will receive Ksh 34.95 billion and Kenya Power Ksh 2.35 billion in the financial year 2021/22 and 2022/23.

The funding is part of fiscal consolidation conditions set by the International Monetary Fund (IMF) which requires the government to accelerate reforms at parastatals and return them to profitability.

For this matter, the government will use at least Ksh 54.8 million to bailout State-owned enterprises (SOEs).