Kenya has officially announced its decision to terminate the Government-to-government (G2G) oil supply deal, which was initiated in April 2023. The G2G oil supply deal, established between Kenya and three national oil exporters from the Gulf, was launched by President William Ruto last spring to counteract the decline of the Kenyan Shilling against foreign currencies.
According to a report by the International Monetary Fund (IMF), the Treasury stated that the scheme did not produce the desired results. The government acknowledges the distortions created in the foreign exchange (FX) market, the increased rollover risk in private sector financing facilities supporting the deal, and affirms its commitment to private market solutions in the energy sector.
The G2G deal, introduced as a departure from the open tender system, where local companies bid to import oil each month, was initially designed for a period of 9 months. However, it was later extended for an additional 12 months until December 2024, after which it will be withdrawn.
Since the launch of the scheme, the Kenyan Shilling has depreciated by over 20 percent against the US dollar, surpassing the historical low mark of 160 to the dollar.