Kenya has officially declared the termination of its Government-to-Government (G2G) oil supply agreement, initiated in April 2023. President William Ruto had introduced the G2G deal with three Gulf national oil exporters last spring to counter the Kenyan Shilling’s decline against foreign currencies.
According to a report from the International Monetary Fund (IMF), the Treasury acknowledged that the intended impact of the scheme had not materialized as expected. The government, recognizing the distortions it caused in the foreign exchange (FX) market and the associated increase in rollover risk for private sector financing facilities, has expressed its commitment to embracing private market solutions in the energy sector.
This shift marked a departure from the previous open tender system, where local companies competitively bid each month to import oil. Initially slated for a duration of 9 months, the agreement was extended for an additional 12 months until December 2024. However, the government has now announced its decision to withdraw from the deal after this expiration date.
Since the commencement of the G2G scheme, the Kenyan Shilling has experienced a depreciation of over 20 percent against the US dollar, surpassing the historical low of 160 to the dollar.
