President William Ruto’s government on April entered into a government-to-government (G-to-G) oil deal with select Gulf Countries to buy fuel on credit in a bit to tame the depreciation of the Dollar.
At the time, the country was experiencing Dollar scarcity as oil companies needed USD500 million every month to import fuel which drained Kenya's foreign exchange reserves.
With a 180-day credit line, the Kenya Kwanza administration assessed that the pressure on the Dollar would lessen, which would subsequently strengthen the Shilling as reported by Reuters.
Despite the deal, the Kenyan Shilling continued to be on a free fall against the dollar, and by December, it had lost 19 per cent of its value.
While it took six months for the G-to-G to live up to its billing, the Shilling, on Thursday, was expected, for the first time in 2023, to gain against the Dollar.
The Treasury has attributed the projected strengthening of the Shilling to reduced dollar demand from the fuel and manufacturing sector.
This has been possible by the G-to-G brokered by Kenya’s Ministry of Energy and Saudi Aramco, Abu Dhabi National Oil Corporation Global Trading (ADNOC) and Emirate’s National Oil Company (NOC).
Additionally, Kenya’s local currency has been boosted by cash flows from loans negotiated by President Ruto’s administration.
In the last six months, Kenya has received a cumulative loan amount of Ksh300 billion from the World Bank and the International Monetary Fund.
The country is also expecting to receive a Ksh150 billion loan from China in early 2024.
With the tourism sector, which is a major foreign exchange earner picking pace, Ruto’s administration is hopeful of strengthening the Shilling, which is currently trading at Ksh153 against the dollar.
Continentally, only the Nigerian Naira and the Angolan Kwanza have performed worse than the Kenyan Shilling in 2023.
