Treasury Secretary John Mbadi has cautioned that the Kenyan shilling might depreciate to as low as Ksh180 versus the U.S. dollar if the existing government-to-government fuel import agreement is terminated.
Speaking at a church gathering in Siaya County on May 23, Mbadi defended the contentious fuel import program, stating that it has contributed to stabilizing fuel supplies and shielding the national currency from additional devaluation.
He cautioned that abandoning the G-to-G fuel agreement would leave Kenya vulnerable to significant dollar shortages and apply increased pressure on the shilling.
“Without a G-to-G arrangement allowing payment deferral of even three months, our shilling will face strain due to heightened dollar demand,” Mbadi warned.
He explained this could potentially weaken the shilling from its current rate of Ksh129 to between Ksh160 and Ksh180 relative to the dollar.
“As the dollar strengthens, fuel prices will exceed current levels. Therefore, I urge people to cease misleading others,” Mbadi cautioned.
The Cabinet Secretary also refuted assertions that Kenya’s elevated fuel prices constitute solely a domestic issue, maintaining that the crisis forms part of a broader global disruption impacting petroleum supply chains.
“Numerous politicians have framed this issue as if it were exclusively a Kenyan challenge. I must emphasize that the fuel problem transcends our bordersit is a global concern,” he stated.
According to the Cabinet Secretary, the conflict in the Middle East has disrupted the regular movement of petroleum products, compelling Kenya to procure fuel from alternative markets beyond the region.
“Fuel shipments from the Middle East to numerous global destinations have ceased, which explains the supply chain disruptions,” he explained.
Mbadi disclosed that oil marketing companies engaged in the current arrangement have been compelled to seek alternative routes, a development he noted has substantially increased transportation and landing expenses.
“Landing costs have risen by 80 percent due to the extended distance the fuel must now travel,” Mbadi disclosed.
The Cabinet Secretary observed that the administration has already allocated over Ksh14 billion to mitigate the effects of escalating fuel costs for Kenyan citizens.
He revealed that the government expended Ksh6.2 billion in April to subsidize fuel, followed by an additional Ksh5 billion and a further Ksh2.7 billion in May to stabilize pump prices.