Kenya is set to back out of the oil deal with gulf oil companies, dubbed gov’t to gov’t, in December this year.
In a report by the International Monetary Fund, the Treasury admitted that the deal, that was entered into back in April 2023, was causing distortions in the foreign exchange market.
The deal was signed with three gulf-state owned companies, namely; Saudi Aramco, Abu Dhabi National Oil Corporation Global Trading (ADNOC) and Emirate’s National Oil Company (NOC), to solve the dollar scarcity problem but the move failed to bore any fruits as the country is still grappling with foreign exchange pressures.
“The government intends to exit the oil import arrangement, as we are aware of the distortions it has created in the foreign exchange (FX) market, the accompanying increase in rollover risk of the private sector financing facilities supporting it and remain committed to the private market solutions in the energy market.
“We commit that all FX (foreign exchange) conversions done as part of the oil scheme will be done at market rates,” the treasury stated.
The government further said that things started going south soon enough as the demand was low hence causing a dip in import volumes.
“In the first 6 months, the actual average monthly import volumes fell short of the monthly minimums agreed under the arrangement. This was due to lower demand from our domestic market as well as from the regional reexports markets,” the government said.
“Five facts are undeniable, there was no G-to-G. Kenya did not sign any contract with Saudi Arabia or the United Arabs Emirates (UAE). Only the Ministry of Energy and Petroleum signed a deal with state-owned petroleum companies in the Middle East. Why Ruto chose to characterise the deal as a G-to-G is the first red flag that points to mischief in this deal,” said Raila.
