The Kenyan government says it plans to exit the Government to Government (G2G) contract, which was inaugurated in April 2023.
The G2G oil supply agreement, reached between Kenya and three Gulf national oil producers, was unveiled by Kenyan President William Ruto last spring in an effort to halt the Kenyan Shilling’s wild fall versus international currencies.
According to an International Monetary Fund (IMF) analysis, the Treasury’s strategy did not perform as expected.
“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 Treasury is quoted as saying.
The agreement marked a departure from an open tender system in which local enterprises competed to import oil each month.
It was initially for 9 months but was extended for an additional 12 months until December 2024, after which it would be withdrawn.
Since the scheme’s inception, the shilling has declined by more than 20% against the US dollar, exceeding the historical low of 160 to the dollar.
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