President William Ruto’s government is seeking to renegotiate its fuel deal with the United Arab Emirates (UAE).

This is as the date of the payment of the first installment of Sh. 70 billion inches closer. Kenya is now expected to make its first payment in about two months.

The fuel-on-credit deal was signed between Kenya and the UAE and Saudi Arabia in March 2023 for the supply of petroleum products on credit.

It was touted by the government of President Ruto as a de that would stabilize the depreciating local currency against the US dollar by minimizing the demand for the dollar.

“I want to assure those in Kenya who were facing challenges of access to dollars that we have taken steps to ensure dollar availability in the next couple of weeks is going to be very different because our fuel companies will now be paying for fuel in Kenya shillings,” President Ruto had said in March.

He claimed that the Shilling would gain to as high as Sh. 115 to Sh. 120 against the US dollar.

“I am giving you free advice. Those of you hoarding dollars might suffer losses. You better do what you must do because this market will be different in a couple of weeks,” said Ruto.

However, with payments about to fall due, the deal has failed to stop the slide of the local Shilling, with analysts predicting that the Shilling might weaken even further when the government makes its payments. The Shilling is currently trading at an all-time official low of Sh. 140 to the US dollar.

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According to a report that appeared in the Daily Nation on the UAE fuel deal, Kenya has accumulated USD 3 billion in fuel debt over the last six months.

“The government has deployed a delegation from the Energy and Petroleum Regulatory Authority (Epra), National Treasury and Energy Ministry that has for the past week been in the UAE negotiating for easing of some clauses in the government-to-government agreement,” the report said.

Apparently, Kenya signed some fixed clauses that have now proved to be very expensive as global fuel prices cool off.

“The fixed terms in the agreement, which were supposed to cushion Kenya from fuel price volatility, have seen the country take a hit as a fall in prices of petroleum products globally failed to reflect at the pump,” the Nation reported.

“Companies that export fuel to neighbouring landlocked countries have in recent weeks preferred to buy the product in Tanzania and transport it through Uganda, denying Kenya the much-needed earnings.”

The Nation further quoted an oil marketer as saying that “even with the longer route through Uganda, they make a higher margin. The government-to-government agreement is hurting Kenyans.”