IMF Pushes Gov't To Abandon Oil Imports On Credit, Says Deal Exposes Kenyan Currency

• The Kenyan government entered into a deal with international oil producing companies to import fuel on credit, stabilise the shilling and pump prices
• International Monetary Fund (IMF) raised concerns that the deal could expose public funds, urging the state to allow private sectors to take full control
• Petroleum Outlets Association of Kenya (POAK) chair Martin Chomba said the move could be part of the government interventions to make the scheme work

The government has announced plans to recede from the oil import on credit scheme inked between Kenya and Middle East oil producing companies.

This followed concerns raised by the International Monetary Fund (IMF) that the deal could eat into public funds.

Government oil import deal hurting Kenyans

Petroleum Outlets Association of Kenya (POAK) chair Martin Chomba told TUKO.co.ke that the IMF concerns could fit different models employed by the government on the oil deal set to be reviewed in December 2023.

"The government has been indicating on trying different models of going about the government-to-government. The scheme was up for review in December 2023, but the IMF is trying to push the government not to offer guarantees, which would expose the consumers... because it does not have money of its own. The guarantees mean the government will use public funds to mitigate private office," said Chomba.

IMF urged the state to step back, giving private-sector players a chance to run the scheme, which was aimed at stabilising the Kenya Shilling.

Treasury CS Njuguna Ndung'u confirmed the move, saying the government has not been actively participating.

"The government will step back and allow the market to work on its own with those deferred letters of credit. We have gone into several cycles until the IMF has understood,” said Ndung'u, as quoted by Business Daily.

Kenya renegotiate oil import deal

Njuguna said the international lender wants the scheme to be renegotiated to have the private sector incur all related risks.

IMF noted that foreign exchange valuation losses, if not passed to consumers, will result in the government using taxpayers' money.

"To reduce risks to the budget, changes in the mechanism for setting pump prices should ensure that fuel price decisions are always aligned with budgeted resources,” said IMF.

In July 2023, the government sent a delegation to UAE to renegotiate the deal ahead of the first payment of $500 million (KSh 70.6 billion) to the companies.

Chomba confirmed that the deal denies Kenyans a chance to enjoy a drop in international fuel prices.

Despite a 24% drop in international crude oil prices to $79.55 (KSh 11,113) per barrel in May 2023, a litre of petrol, diesel and kerosene now retail at KSh 195.53, KSh 179.67 and KSh 173.44, respectively.