Kenya plans to start importing fuel from the United Arab Emirates from next month following a deal with the Middle East government to delay payments for oil imports by up to a year to alleviate pressure on the demand for dollars.
Energy and Petroleum Cabinet Secretary Davies Chirchir announced that from next month, Kenya will start importing fuel on credit from the UAE through the State-owned National Oil Corporation (NOCK).
Under the government-to-government deal, Kenya will import 30 per cent of its monthly fuel requirements, which account for 28 per cent of the country’s monthly imports. The credit agreement is expected to ease the foreign exchange crisis and stabilise the shilling, which has been under pressure due to high demand for the US dollar.
The delayed payments is expected to reduce the amount of hard currency required to purchase oil, hence reducing demand for the dollar in the market.
In the current budget, the expenditure on imported stuff increased by 16 per cent to KES 2.49 trillion due to the high cost of importing fuel and foodstuff, showing the dent imported fuel has on the economy every month. The import bill is close to 70 per cent of the budget for the current year ending June.
Currently, pump prices have remained stable since November, with a litre of super petrol retailing at KES 177.30 in Nairobi and diesel at KES 162 per litre, up from KES 106.99 and KES 96.40, respectively, in February 2021.
The director-general of the Energy and Petroleum Regulatory Authority (Epra), Daniel Kiptoo, explained that the effect on pump prices would only be known after the bids are evaluated.
Last week, the shilling hit a new all-time low against the greenback after breaking below the 127-per-dollar mark, setting up consumers to costly imported goods such as cars, electronics and machinery as well as power bills.
The Energy ministry says the importation of fuel on credit is mainly aimed at strengthening the shilling against the dollar.
“For the products that will come in April and May, they will come with more government support and deferred payments so that we significantly reduce the pressure on the dollar,” Mr Chirchir said on Wednesday as reported by Business Daily.
Read also; Fuel Prices to Reduce in April or May.
