Cabinet approves extension of G2G oil deal

The Cabinet has approved the extension of the Government-to-Government (G-to-G) arrangement for the importation of refined petroleum products, a move expected to bolster Kenya's economy and ease pressure on the shilling.

The decision was arrived at following a Cabinet meeting in Nairobi on Tuesday chaired by President William Ruto.

According to the government, the arrangement, which allows Kenya to import petroleum products without using foreign currency, has notably reduced the demand for US dollars, helping to stabilize the exchange rate and lower fuel prices.

"This arrangement has eased the monthly demand for US dollars for petroleum imports, stabilising the shilling-dollar exchange rate at Ksh.129 from a high of Ksh.166 and reducing pump prices from Ksh.217 per litre of petrol to Ksh.177," read a Cabinet despatch.

"The arrangement secures the supply of refined petroleum by allowing payments in Kenya shillings, previously estimated at $500 million a month."

In January, Kenya sought to exit the G2G deal with Saudi Arabia saying that it is distorting the forex market, admitting that it has failed to ease the pressure on the dollar.

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

The deal agreed between Kenya and three national oil exporters from the Gulf, provides for six-month credit for oil imports, backed by letters of credit issued by participating commercial banks.

In addition to the petroleum import arrangement, the Cabinet approved the procurement of Liquefied Petroleum Gas (LPG), Heavy Fuel Oil, and bitumen - through a centrally coordinated bulk procurement system.

Speaking during the meeting, President Ruto expressed his gratitude to his Cabinet for their hard work and commitment throughout the year, citing the gains already made in food production, housing, labour mobility to access opportunities abroad, and tourism, among others.

"Many people thought we would concentrate on populism, but we concentrated on transformation; many thought we would concentrate on politics, but we concentrated on leadership," he said.

"It is not about some people, but all the people of Kenya."