The Cabinet has approved the extension of the Government-to-Government (G-to-G) arrangement for importing refined petroleum products, citing its success in stabilizing the economy and easing the demand for US dollars.
In a statement released after a Cabinet meeting chaired by President William Ruto, it was noted that the G-to-G deal has significantly stabilized the shilling-dollar exchange rate at KSh 129, down from a high of KSh 166. Additionally, the arrangement has reduced pump prices from KSh 217 per litre of petrol to KSh 177.
The agreement, initially set to run for nine months, has been extended for another 12 months, pushing its duration to December 2024. The Cabinet highlighted that the arrangement ensures a steady supply of refined petroleum products by allowing payments in Kenya shillings. Previously, monthly dollar payments for petroleum imports were estimated at $500 million.
Under the G-to-G scheme, fuel is imported on a six-month credit backed by commercial letters of credit (LOCs) issued by domestic banks and confirmed by international banks. The arrangement also involves government-issued letters of support to domestic Oil Marketing Companies (OMCs), benefiting financial institutions, credit insurers, lenders, and hedging counterparties providing support to OMCs.
Petroleum imports account for 30% of Kenya’s total dollar requirements. Before the implementation of the G-to-G deal, the Open Tender System (OTS) required payments in US dollars purchased on the spot market, leading to heightened demand for foreign currency.
The Cabinet also approved a centrally coordinated bulk procurement system for Liquefied Petroleum Gas (LPG), Heavy Fuel Oil, and bitumen, aiming to streamline procurement and reduce costs.
During the meeting, President Ruto lauded the Cabinet’s efforts over the past year, highlighting achievements in key sectors such as food production, housing, labour mobility, and tourism.
“Many people thought we would concentrate on populism, but we concentrated on transformation. Many thought we would focus on politics, but we focused on leadership,” President Ruto remarked.
He reiterated his administration’s commitment to serving all Kenyans, adding, “It is not about some people, but all the people of Kenya.”
