Kenya recently signed some deals with firms from Saudi Arabia and the United Arab Emirates (UAE) to supply diesel, petrol, and jet fuel on credit for the next 6 months to ease mounting pressure on the demand for foreign currency as well as to try to stem the Kenya shillings slide vs.
the US dollar and other major currencies. In a deal backed by government-to-government arrangements, Saudi Aramco, Abu Dhabi National Oil Company, and Emirates National Oil Company will be supplying fossil fuels on credit to Kenya.
Reports say Kenya’s demand for fossil fuels is now close to $500 million per month! That’s a huge chunk of Kenya’s total import bill. At this pace, in 12 months, Kenya would be spending $6 billion on fossil fuel imports!
The continued reliance on fossil fuel imports is one of the main drivers of Kenya’s trade deficit. Let’s look at the last few years:
According to the last Economic Survey from the Kenya National Bureau of Statistics (KNBS), there was 30.9% growth in imports in 2021. The increase in imports widened the trade deficit from KSh 999.9 billion in 2020 to KSh 1.4 trillion in 2021. That’s a trade deficit of about US$11.8 billion! Imports rose from KSh 1.6 trillion in 2020 to KSh 2.1 trillion, mainly driven by an increase in imports of petroleum products.
This shows that there has been a huge jump in demand for petrol, diesel, and related fossil fuels from about $3 billion in 2021 to the $6 billion Kenya would need this year at around $500 million per month. It won’t stop there, as demand will keep rising in the near future as more vehicles are added to the country’s fleet.
By moving to get fuel on credit for 6 months and only starting to pay for it after the 6-month period, instead of the usual upfront payments, they really hope to slow down the slide of the local currency in the short term. How about in the long term?
Source : Clean Technica