Ministry of Energy Compares Tanzania's Oil Importation Deal with Kenya's, Defends G-to-G Arrangement

 

Kenya's CS Ministry of Energy Opiyo Wandayi 

The Ministry of Energy has defended the government-to-government (G-to-G) deal following reports that it has cost taxpayers over KSh 16 billion more than the open tender system that was replaced. On March 10, 2023, the Government of Kenya signed Master Framework Agreements for the supply of petroleum products under a G-to-G arrangement with extended credit terms of 180 days. Why Kenya adopted G-to-G arrangement The Ministry of Energy, through the State Department for Petroleum, explained that although the G-to-G deal costs more because of the extended credit window of 180 days, it has met its main objectives. The ministry emphasised that the deal was designed to address USD liquidity challenges by accumulating $500 million (about KSh 64.5 billion) in foreign reserves monthly, reviving the interbank market to curb speculative activities, and ensuring foreign exchange rate stability to support economic recovery, reduce public debt growth, and promote fiscal consolidation. "The G-to-G program has provided immense benefits to the country's economy in particular with regard to the USD liquidity and appreciation of the Kenya Shilling against the USD. It is worth noting that at the time the G-to-G arrangement was implemented, the country was grappling with serious USD liquidity issues which had in turn negatively affected the value of the Kenya Shilling against the USD At the time, the Federal Reserve rate was at its highest in 22 years leading to capital flight from frontier markets which included Kenya. It had been forecasted that the Kenya shilling would reach a low of KSh 190 to 200 per USD if status quo was maintained," the ministry explained in a press release. Comparison to Tanzania The Ministry noted that despite the higher costs incurred under the G-to-G deal, Kenya still boasts the lowest freight and premium costs and the longest credit period of 180. "The F&Ps (freight and premiums) under the G-to-G arrangement are by far the most competitive in the region, further noting that Kenya has the longest credit period (180 days) compared to Tanzania, for example, with a credit period of 60 days," the Ministry said.

by  Elijah Ntongai