The decision, which comes amid growing public concern over the high cost of living, is expected to trigger an immediate drop in fuel prices across the country.
For months, Kenyans have grappled with rising transport costs and inflated prices of basic commodities, largely driven by expensive fuel.
By halving the VAT rate on petroleum products, the government is seeking to cushion households and businesses from persistent economic pressure while stimulating broader economic activity.
Energy sector analysts say the move could restore some stability in the market, especially for transport operators and manufacturers who rely heavily on fuel.
Speaking during the assent, President Ruto emphasized that the intervention is part of a wider strategy to protect Kenyans from global economic shocks.
He noted that while international oil prices remain volatile, the government is committed to implementing policies that shield citizens from excessive costs.
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“This is about putting money back into the pockets of Kenyans,” Ruto said, adding that affordable fuel would have a ripple effect across key sectors of the economy, including agriculture, logistics, and manufacturing.
The tax reduction is also expected to lower the cost of public transport, offering relief to millions of commuters who have been paying higher fares.
Matatu operators have previously cited high fuel prices as a major reason for fare hikes, and pressure is now mounting on them to pass on the benefits to passengers.
However, economists have raised concerns about the potential impact on government revenue. VAT on petroleum products has been a significant source of income for the state, and the reduction could widen the fiscal deficit if alternative revenue streams are not identified.
Despite these concerns, business leaders have welcomed the move, arguing that lower fuel costs will enhance productivity and competitiveness.
Small and medium enterprises, in particular, are expected to benefit from reduced operational expenses.
The Energy and Petroleum Regulatory Authority (EPRA) is now expected to adjust fuel pricing in line with the new tax regime in the next review cycle.
Kenyans will be watching closely to see how quickly the changes translate into lower pump prices.
As the country navigates economic challenges, the VAT cut signals the government’s attempt to strike a balance between revenue generation and public welfare, a move that could shape Kenya’s economic trajectory in the coming months.
