The death toll in Kenya climbed past 40 yesterday as anti-government protests over soaring fuel prices took a dangerous new turn. Demonstrators, furious over a 20% hike in petrol costs, have now targeted British-owned refineries in Mombasa. Reports confirm that two refineries, both subsidiaries of BP and Shell, were stormed by crowds. Machinery was smashed, storage tanks were vandalised, and a fire at one site sent plumes of black smoke across the port city. Security forces fired live rounds into the crowd. At least 12 protesters were killed at the refineries alone.
This is the predictable result of a government that spent its way into a corner. Kenya’s fiscal deficit ballooned to 8.5% of GDP last year. The IMF demanded austerity. The government complied by slashing subsidies on fuel. When petrol hit 200 shillings per litre (nearly £1.30), the fuse was lit. The bond market has already priced in a default for Kenya’s 2024 sovereign bonds. Yields are at 18%. Capital flight is accelerating.
But the blame doesn't stop in Nairobi. The British government must answer for its role. UK Export Finance has provided £450 million in guarantees to support refinery operations in Kenya. This is taxpayer money being used to back a system that now sees British firms attacked. Shell and BP have yet to comment on the safety of their staff, but all non-essential personnel have been evacuated from Mombasa.
The Bank of England will be watching. A destabilised Kenya means higher risk premiums on frontier market debt. UK pension funds hold £2.3 billion in Kenyan assets. Capital flight from emerging markets is a known contagion risk. If history teaches us anything, this will not remain a local tragedy.
Fiscal discipline is not optional. The Kenyan government is now paying the price for its profligacy. The British taxpayer will pay for its government's misplaced guarantees. And the protesters? They pay in blood. The bottom line never blinks.
