National Treasury Cabinet Secretary Njuguna Ndung’u has denied that the government-to-government oil agreement with Saudi Arabia was a flop.
On Friday, CS Ndung’u criticized the media for what he claimed was a distortion of the facts as he attempted to clarify the passage taken from the International Monetary Fund (IMF) report.
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 elucidated.
“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.”
“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.”
Ndung’u supported the agreement, claiming that it prevented the Kenyan shilling from depreciating further and that the country had benefited from it. Since the agreement’s approval, he said, there have been no reports of fuel shortages.
“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 said.
In light of this, the CS restated the achievements the government has made since the beginning of the G2G transition.
“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.”
Prof Ndung’u’s comments came just hours after Kenya declared it was pulling out of the G2G agreement with Saudi Arabia, citing the latter’s manipulation of the foreign exchange market.
President William Ruto announced the G2G agreement in April 2023, claiming it would stabilize the value of the shilling relative to the US dollar.
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