By Rédaction Africa Links 24 with Africanews
Published on 2024-01-19 16:01:51
The Kenyan Government initiated a Government to Government (G2G) oil supply deal with three national oil exporters from the Gulf in April 2023, but it is now planning to exit the agreement. The deal was launched by President William Ruto in an effort to stabilize the free fall of the Kenyan Shilling against foreign currencies.
According to a report by the International Monetary Fund (IMF), the Treasury has acknowledged that the G2G oil supply deal has not yielded the desired results. The Treasury has indicated its intention to exit the oil import arrangement due to the distortions it has created in the foreign exchange market, as well as the increased rollover risk of the private sector financing facilities supporting the deal. The government remains committed to finding private market solutions in the energy sector.
The G2G deal replaced the previous open tender system, in which local companies bid to import oil each month. Initially planned for a period of 9 months, the agreement was extended for an additional 12 months until December 2024. However, the government now plans to withdraw from the deal after this extended period.
Since the launch of the G2G deal, the Kenyan Shilling has depreciated by over 20 percent against the US dollar, surpassing the historical low mark of 160 to the dollar.
Overall, the Kenyan Government’s G2G oil supply deal has not achieved its intended goal of stabilizing the exchange rate of the Kenyan Shilling. As a result, the government has made the decision to exit the agreement and shift its focus towards private market solutions in the energy sector.
