Soaring fuel costs: Is President Ruto driving economy to the ground?

President William Ruto is walking a tightrope as the fuel crisis threatens to revive the cost-of-living pressures that nearly crippled his administration during the 2023 opposition-led protests and the 2024 Gen Z demonstrations.

Even as the president and his allies project confidence, economists warn the crisis could tip the country towards recession and drive up inflation.

Concerns have spread quickly across sectors, emerging within hours of the new pump prices taking effect, reinforcing an already bleak economic outlook.

Facing mounting criticism over his handling of the economy and the spending of senior government officials, Ruto now confronts renewed pressure as living costs are set to rise further.

The government’s move to cut VAT from 16 per cent to eight per cent has offered little relief. Industry players have dismissed it as inadequate, while the opposition has seized on it to mobilise public discontent.

Yesterday, The Standard established that the president’s advisers are exploring ways to steady the economy amid mounting public pressure over soaring fuel costs, whose impact on daily life has been immediate.

Observers say the president is increasingly cornered, and how he navigates the crisis could shape his national support.

Several of his allies privately admitted they are worried about what lies ahead, warning the situation is likely to erode the popularity of leaders in government.

“Members of the public believe that they are suffering simply because the elected leaders are not doing what they are supposed to be doing to cushion them from some of these things. However, that is not the truth,” said Awendo MP Walter Owino.

The opposition has seized on the fuel crisis to attack the president’s policies and the perceived lavish spending of his allies, even as many Kenyans struggle.

Interviews with sector players across the country indicate businesses are bracing for a slowdown. They warn that rising living costs will erode purchasing power and weigh on economic growth.Despite the growing concern, Ruto struck an optimistic tone yesterday, insisting the situation is under control.

“There is a war in the Middle East, and the cost of oil has skyrocketed everywhere. However, here in Kenya, we have concrete plans to ensure that we moderate the costs. We have dedicated Sh6.5 billion to stabilise prices through subsidies. We have also reduced VAT and have enough fuel,” said Ruto.

It remains to be seen how many Kenyans will accept his assurances, after the president also claimed that paraffin used by boda boda operators was unaffected by the price increase. Motorbikes, however, run on petrol, casting doubt on the accuracy of his remarks.

With pump prices now soaring above Sh206 per litre in many parts of the country, the effects are already rippling through key sectors, driving up transport costs, pushing food prices higher and squeezing consumer spending. A similar environment in 2024 pushed the Kenya Kwanza administration to the brink, as Gen Z protesters defied bullets, abductions and intimidation to challenge Ruto’s policies.

Political analyst and High Court advocate Wycliffe Onyonje warns that a sustained fuel hike could place further strain on the economy.

“Fuel is a key driver of the economy. Once prices go up, transport costs increase, production becomes more expensive, and the overall effect is a rise in inflation,” he said.

According to Onyonje, the increase is likely to erode consumers’ purchasing power as households cut back on non-essential spending in anticipation of tougher times.

“When people are forced to spend more on fuel and transport, they reduce expenditure elsewhere. That weakens demand and slows down business activity,” he explained.

He added that the impact cuts across sectors, particularly transport, agriculture and manufacturing, where fuel is a critical input.

“Higher fuel costs mean higher operational expenses, from moving goods to processing them. This eventually leads to increased food prices and a strained supply chain,” he said, warning that sustained economic hardship could significantly weaken the President’s chances at the ballot.

Economist Desterio Okumu says the fuel hike has a direct and immediate impact on the economy, primarily by triggering inflationary pressure.

“Fuel prices have a direct effect on the economy as they trigger inflation due to a sharp spike in commodity prices,” he said.

Okumu warned that the country is likely to see a rapid increase in the cost of consumer goods, further straining already stretched household incomes.

“We are going to see prices of consumer commodities rise exponentially, adversely affecting already depressed household incomes,” he said.

The knock-on effects, he added, could spread across the economy, slowing business activity and weakening overall growth prospects.

Drawing parallels with global trends observed by the International Monetary Fund, Okumu noted that sustained fuel price increases often lead to supply chain disruptions and long-term economic pressure on both businesses and governments.

Beyond the economic implications, Okumu warned that the rising cost of living could also have serious political consequences for Ruto.

“The rise in the cost of living has a direct adverse impact on the lives of Kenyans, the majority of whom are voters,” he said.

He argued that as households struggle to meet basic needs, public frustration is likely to grow.

“Many Kenyans, unable to meet their basic needs, may view the President as the primary source of their hardship and are therefore likely to cast a protest vote against him,” he added.

As fuel prices continue to climb, experts say the government faces growing pressure to implement measures to cushion consumers and stabilise the economy before the situation escalates further.

Israel Agina, Chairman of the Kenya National Chamber of Commerce and Industry Kisumu Branch, said the government is unprepared.

“While it may be difficult to predict such global developments, countries must always maintain strategic fuel reserves to cushion themselves during emergencies. Unfortunately, Kenya does not appear to have adequate reserves to sustain the economy during such shocks.”

Prof XN Iraki, Economist at the University of Nairobi, is predicting a rise in inflation as one of the most immediate impacts.

“The cost of production will go up, transport expenses will increase, and ultimately, prices of goods and services will rise. Unfortunately, wages and salaries do not increase at the same rate, meaning the burden will fall heavily on ordinary citizens. In some cases, businesses facing higher operational costs may be forced to lay off workers, worsening unemployment,” said Iraki.

While the government has attempted to cushion citizens through subsidies and tax adjustments, many feel these measures are insufficient.

Yesterday, this strain was already visible as Kenyans accused President William Ruto’s administration of “deceptive tendencies to downplay the crisis”.

In Homa Bay, boda boda operators and motorists warned of dire consequences if the problem persists. 

Speaking in Rodi Kopany Township, the riders said Ruto’s campaign ahead of the 2022 General Election was premised on lowering the cost of living.

Philip Mirego, a rider said they expected the government to consider the common man in fuel prices.

“President Ruto campaigned on the basis of bottom-up. But the increase in fuel prices means it is top-down. Let him reduce the cost of fuel,” Mirego said.

Jared Ouma said the so-called broad-based government is not helping Kenyans.

“The development means even a broad-based government does not help ordinary citizens,” Ouma said.

Observers warn that the government’s failure to prioritise the crisis could erode the president’s support. Sensing a potential backlash, some of his allies have taken to social media to defend the administration and praise the decision to lower VAT on fuel.

Kapsaret MP Oscar Sudi, for instance, used his Facebook page to push back against opposition claims on fuel costs.

Siaya Governor James Orengo said corruption in government and bad policy decisions by Ruto’s regime will hurt the country.

“The rise in fuel prices is affecting every sector of the economy. While global factors such as the Middle East conflict play a role, there are deeper issues at play locally. The high cost of fuel is not just a result of international dynamics, but also concerns around governance, including corruption and policy decisions that continue to burden citizens. If this is the path towards economic transformation, then there are serious reasons for concern.”

Kuria West MP Mathias Robi said life is going to be hard. “This is because fuel is everything. When the cost of transport is high, everything is high. We expect everything to rise.”

But he added he was optimistic the situation will change once the war in the Middle East stops.

[Additional reporting by Anne Atieno, Mary Imenza and Rodgers Otiso]