Gov’t now denies G2G oil deal failure, claims Kenya has benefitted

National Treasury Cabinet Secretary Njuguna Ndung’u now says the Kenya Kwanza administration did not admit to failure of the government-to-government oil arrangement with Saudi Arabia.

CS Ndung’u, in a statement released on Friday evening, sought to clarify the text quoted from the International Monetary Fund (IMF) report as he faulted the media over what he said was a misrepresentation of facts.

He said they did not admit to the failure of the arrangement, but that their statement to the IMF “specifically addresses the anticipated rollover risk associated with private sector financing facilities supporting the arrangement.”

“It is imperative to set the record straight on the nature and purpose of the government's participation in the government-to-government (G to G) oil import arrangement. This initiative was implemented as a temporary measure with the primary objective of stabilizing the market and alleviating foreign exchange market pressures,” he explained.

“Contrary to misleading assertions, the government's eventual exit from this arrangement has always been part of the strategic plan to pave the way for private sector players to assume a more prominent role.”

He added: “The assertion that the government has admitted failure in the G-to-G approach is a gross misinterpretation. The quoted text in the IMF report specifically addresses the anticipated increase in rollover risk associated with private sector financing facilities supporting the arrangement, a predictable outcome given the inherent dynamics of such financial structures.”

The Cabinet Secretary defended the deal saying it served to further stem the depreciation of the Kenya shilling and that the country has recorded immense benefits from the arrangement, with no stock-outs of fuel products reported since the adoption of the arrangement.

“Further, since the commencement of the G to G arrangement, the country and the region at large have enjoyed security of supply of petroleum products and there have been no instances of product stock outs as had been witnessed just before the arrangement,” he stated.

The CS consequently reiterated the milestones the government had attained since the start of G2G migration.

“The importation of petroleum through a Government to Government arrangement is one of the key measures that the Government of Kenya initiated in early 2023 in order to avoid an economic shutdown due to supply constraints that existed then and in particular US Dollar liquidity problems,” he said.

“At the time, the monthly demand for US Dollars by the petroleum sector was about 500 million per month that had put a strain on the country's forex reserves threatening the security of supply of petroleum and other critical sectors such as food and agriculture that also heavily rely on imports. In addition, the inter-bank forex market was dysfunctional.”

The remarks by Prof. Ndung’u came hours after Kenya announced it was exiting the G2G deal with Saudi Arabia saying that it is distorting the forex market and claims that the government had admitted that it has failed to ease the pressure on the dollar.

The G2G deal which was launched by President William Ruto in April 2023, was billed as the solution to stabilising the Shilling against the Dollar.