The Cabinet has approved the extension of the Government-to-Government (G-to-G) arrangement to import refined petroleum products.
Cabinet said the arrangement has eased the monthly demand for US dollars for petroleum imports.
This, they said, has stabilised the shilling-dollar exchange rate at Sh129 from a high of Sh166 and reduced pump prices from Sh217 per litre of petrol to Sh177.
The cabinet chaired by President William Ruto said the arrangement secures the supply of refined petroleum by allowing payments in Kenya shillings, previously estimated at $500 million a month.
The Government-to-Government oil deal was to end in December 2024.
The scheme, which was initially for nine months, was extended for another 12 months to December 2024, including negotiating some favourable costing terms.
The G-G scheme includes the issuance of letters of support by the government to domestic OMCs that also benefit the banks, financial institutions, credit insurance providers, lenders, and any hedging counterparties providing financing, insurance, refinancing or hedging to the OMC.
The fuel is imported on six-month credit, backed by commercial letters of credit (LOCs) issued by domestic banks and confirmed by international banks.
Petroleum products imports account for 30 per cent of Kenya's total dollar requirements.
Before the deal, payment of products under the Open Tender System (OTS) was in US Dollars purchased on the spot market over a short period, following receipts of products.
The Cabinet meeting also approved the procurement of Liquefied Petroleum Gas (LPG), Heavy Fuel Oil, and bitumen through a centrally coordinated bulk procurement system.
The President thanked the Cabinet for their hard work and contributions during the year. He cited the gains already made in food production, housing, labour mobility to access opportunities abroad, and tourism, among others.
“Many people thought we would concentrate on populism, but we concentrated on transformation; many thought we would concentrate on politics, but we concentrated on leadership,” he said.
“It is not about some people, but all the people of Kenya.”