EXPLAINER: Why Kenyan Shilling Could Fall To Ksh180/Dollar From Fuel Crisis
Treasury Cabinet Secretary John Mbadi has warned that if the present government-to-government (G-to-G) petroleum import agreement is cancelled, the Kenyan shilling might fall to as low as Ksh180 per US dollar.
During a church service in Siaya County on Saturday, May 23, Mbadi supported the contentious gasoline import agreement.
The CS claimed that it has helped stabilize fuel supplies and protect the local currency from further depreciation.
He cautioned that abandoning the G-to-G gasoline deal would expose Kenya to acute dollar shortages and put additional pressure on the currency.
“If you don’t have a G-to-G arrangement where payment is deferred even by three months, there will be strain on our shilling because the demand for the dollar will be high,” Mbadi warned.
He explained that higher demand for dollars by fuel importers would push the exchange rate higher, potentially weakening the shilling from the current Ksh129 to between Ksh160 and Ksh180 against the dollar.
“Once the dollar strengthens, fuel prices will be higher than what we are seeing. So let people stop misleading others,” Mbadi cautioned.
The CS further dismissed claims that Kenya’s high fuel prices are purely a local problem, insisting the crisis is part of a wider global disruption affecting petroleum supply chains.
“Many politicians have localised this thing as if it were a Kenyan problem alone,” he stated.
“I want to tell you that the problem of fuel is not a Kenyan problem. This is a global problem.”
According to the CS, the Middle East war disrupted the normal flow of petroleum products, forcing Kenya to source fuel from alternative markets outside the region.
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“There is no fuel that is coming from the Middle East to many parts of the world, and that is why the supply chain has been disrupted,” he said.
Mbadi revealed that oil marketing companies contracted under the current deal have been sourcing fuel from alternative destinations, a move he said has significantly increased transportation and landing costs.
“The landing cost has increased by 80 per cent because the route the fuel is taking is now longer,” Mbadi disclosed.
The CS noted that the government has already spent more than Ksh14 billion in cushioning Kenyans from the impact of rising fuel costs.
He disclosed that the government spent Ksh6.2 billion in April to subsidise fuel before injecting another Ksh5 billion and an additional Ksh2.7 billion in May this year to stabilise pump prices.
EXPLAINER: Why Kenyan Shilling Could Fall To Ksh180/Dollar From Fuel Crisis
