NAIROBI, Kenya, Jan 20 — The National Treasury has dismissed speculation over a premature end of the government-to-government oil procurement deal terming a planned exit as part of President William Ruto’s strategic plan from the onset.
Responding to media reporting the International Monetary Fund (IMF) assessment of the deal, Treasury Cabinet Secretary Njuguna Ndung’u affirmed that the anticipated rollover risk associated with lenders financing the deal was predictable.
As such, Ndung’u said the government had set out timelines to respond to market dynamics at the appropriate time.
“Contrary to the misleading assertions, the government’s eventual exit from this arrangement has always been part of the strategic plan to pave the the way for
private sector players to assume a more prominent role,” he said in a statement on Friday.
“The suggestion that the government’s exit is a noteworthy development is unfounded, as it aligns with the pre-established timeline and objectives of the initiative,” Ndung’u asserted.
Extended contract
The National Treasury ruled out the cancellation of an existing import arrangement with Gulf-based companies “until the obligations in the current contracts [are] extinguished”.
Kenya ditched an open tender system in which oil markers sourced for petroleum products monthly after inking a deal with Saudi Aramco, Abu Dhabi National Oil Company and Emirates National Oil Company in April.
Later in September, the Energy and Petroleum Regulation Authority (EPRA) extended the deal to December 2024.
EPRA Director General Daniel Kiptoo said at the time negotiations had yielded consensus that saw the reduction in costs.
The National Treasury pointed out its intention to end the deal during Article IV consultations with the IMF.
It attributed the planned exit to forex market “distortions” and credit risk.
“The government intends to exit the oil import arrangement, as we are cognizant of the distortions it has created in the FX market, the accompanying increase in rollover risk of the private sector financing facilities supporting it and remain committed to private market solutions in the energy market,” Treasury explained.
Kenya however assured IMF that all forex conversions will done at market rates with accrued interests used to compensate for forex-driven shortfalls.
“We will also amend regulations on the fuel pricing formula to specify passthrough of the exchange rate risk component and any other risks that may materialize,” Treasury affirmed.
