How Ruto’s VAT U-turn deepens Kenya’s cost crisis paradox
By Aloys Michael, April 15, 2026Kenya’s latest fuel price hike has thrown renewed focus on the government’s shifting tax strategy after a decision to reduce Value Added Tax (VAT) on petroleum products from 16 per cent to 13 per cent signalled a partial retreat from earlier hardline fiscal policies.
The VAT cut, announced alongside the latest fuel pricing review, is intended to cushion consumers from rising global oil costs.
“To cushion consumers from the high landed cost of petroleum products driven by rising global prices, the VAT rate on super petrol, diesel, and kerosene has been effectively reduced from 16 per cent to 13 per cent,” the Energy and Petroleum Regulatory Authority (EPRA) announced.
In addition, the government has said it will draw approximately Ksh6.2 billion from the Petroleum Development Levy (PDL) Fund to stabilise pump prices.
However, the relief appears limited as on Tuesday, April 14, 2026, the Energy and Petroleum Regulatory Authority (EPRA) announced sharp increases in pump prices for the April–May cycle, raising the cost of Super Petrol by Ksh28.69 per litre and Diesel by a steep Ksh40.30 per litre, while Kerosene prices remain unchanged.
The adjustments, EPRA said, reflect mounting pressure from global oil markets and domestic supply disruptions.
For many Kenyans, the VAT reduction and PDL intervention have done little to offset the impact of surging fuel costs, which continue to ripple through transport fares and the prices of basic goods.
The developments have revived scrutiny of President William Ruto’s evolving economic stance, particularly his approach to subsidies.
When he assumed office in September 2022, he moved swiftly to eliminate fuel subsidies, describing them as unsustainable and prone to abuse.
The government argued that more than Ksh144 billion had been spent on subsidies that disproportionately benefited a small segment of the population.
“This is equivalent to the entire national government development budget,” Ruto said in his inaugural address.
The fuel crisis
The move aligned with Kenya’s commitments under an International Monetary Fund (IMF) programme, which has consistently argued that fuel subsidies are regressive.
“The benefits of these subsidies tend to accrue to richer households [more] than poorer households,” IMF Africa director Abebe Selassie noted.
Yet the immediate aftermath of subsidy removal saw fuel prices surge, triggering a broader cost-of-living crisis and eroding household purchasing power, an outcome that has continued to carry political consequences.
By early 2026, faced with persistent global volatility and domestic economic strain, the government began deploying measures that mirror subsidies in practice.
The VAT reduction and use of the PDL fund now function as indirect cushioning tools, signalling a shift from ideological rigidity to economic pragmatism.
Even so, the latest price increases suggest these interventions remain insufficient, particularly as diesel costs, critical to transport and manufacturing, continue to climb, amplifying inflationary pressures across sectors.
The Motorists Association of Kenya (MAK) had earlier urged the government to act ahead of the latest fuel price review by EPRA, warning that high pump prices continue to strain households and businesses.
In a statement released on April 14, 2026, the association said the monthly review could result in “an increase, decrease, or retention of current prices” but insisted that policy decisions must focus on easing the burden on Kenyans.
“We reiterate that good governance demands the formulation of policies that prioritise the welfare of citizens, rather than copying exploitative practices from countries that take advantage of their own people,” MAK said.
The group called for the return of fuel subsidies, arguing that their removal has exposed consumers to rising costs across the economy. It linked high fuel prices to increases in food costs and transport fares, saying the effects are already visible.
“The decision by the current administration to remove fuel subsidies now presents the right opportunity to restore them, in order to cushion Kenyans against the severe consequences of high fuel prices,” the statement read.
Ruto’s headache
Critics say the apparent policy reversals have created inconsistency and eroded public trust.
Kiharu MP Ndindi Nyoro has accused the government of lacking transparency in fuel pricing, arguing that meaningful relief requires a combination of subsidies, VAT reductions, and lower fuel levies.
“Fuel prices must have the three components: subsidies, reduction of VAT and reduction of fuel levy,” he said during a press briefing on Tuesday.
Nyoro also raised concerns about what he termed a business-driven arrangement in the fuel sector, suggesting that a small group of insiders may be benefiting, and questioned the handling of a Ksh4.8 billion fuel scandal, citing a lack of visible accountability.
The government, however, maintains that its approach is anchored in long-term fiscal sustainability, arguing that removing blanket subsidies was necessary to manage rising public debt, while current interventions are more targeted.
Ruto has instead emphasised producer-focused support, such as fertiliser subsidies, as a pathway to lowering the cost of living.
“Our strategy to bring down the cost of living is predicated on empowering producers,” he has said previously.
Still, the re-emergence of subsidy-like measures highlights the difficulty of balancing fiscal discipline with political and economic realities. Kenya’s dependence on imported fuel continues to expose it to global price shocks, constraining policy options.
As pump prices rise despite tax cuts, the contradiction between the administration’s earlier anti-subsidy stance and its current reliance on indirect cushioning measures is becoming increasingly clear.