- In a November 2024 report to the IMF, the state noted that the government-to-government oil import deal with Gulf countries did not meet its goals
- The initial six-month deal, which was extended to December 2024, saw Kenya lose much in terms of oil demand and re-export market
- Treasury revealed that in the first six months, the actual average monthly import volumes fell short of the monthly minimums agreed under the arrangement
Kenya has told the International Monetary Fund (IMF) that it plans to exit the oil import agreement with three national oil exporters from the Gulf.
Why govt wants to quit oil import deal
In a November 2024 report to the IMF, the state noted that the government-to-government oil import deal with Gulf countries did not meet its goals.
Treasury explained that the deal had created distortions in the forex (FX) market and that the government should revert to the previous open tendering system.
“The government intends to exit the oil import arrangement, as we are cognizant of the distortions it has created in the FX market, the accompanying increase in rollover risk of the private sector financing facilities supporting it and remain committed to private market solutions in the energy market,” the government stated.
How the oil import credit deal affected Kenya
The initial six-month deal, extended to December 2024, saw Kenya lose much in terms of oil demand and re-export market.
Treasury revealed that in the first six months, the average monthly import volumes fell short of the monthly minimums agreed upon.
The deal was an interim measure to help ease FX pressures after the shilling depreciated against the United States (US) dollar.
The Ministry of Energy announced the government-to-government deal at Kawi House in Nairobi.
Under the agreement, Aramco was to supply two diesel cargo consignments monthly, while Abu Dhabi National Oil Company would supply three petrol cargo consignments.
Why Kenya defended oil deal
Earlier, the Ministry of Energy defended the government-to-government (G-to-G) oil deal amid reports that it cost taxpayers over KSh 16 billion more than the previous open tender system.
The ministry explained that despite the higher costs, the G-to-G deal addressed liquidity challenges and stabilised the exchange rate.
It highlighted that Kenya’s G-to-G deal featured the lowest freight and premium costs in the region and the longest credit period of 180 days, compared to Tanzania’s 60 days.
