Mbadi Warns Scrapping G-To-G Fuel Deal Could Make Shilling Fall to KSh180

Treasury Cabinet Secretary John Mbadi has defended Kenya’s government-to-government (G-to-G) fuel import arrangement, warning that scrapping the programme could trigger a sharp depreciation of the Kenyan shilling and worsen economic pressures facing the country.

Speaking during a church service in Siaya County on Saturday, Mbadi argued that the fuel import framework has played a crucial role in stabilising both fuel supplies and the foreign exchange market. 

According to the Treasury chief, removing the arrangement without a viable replacement could significantly increase demand for U.S. dollars and place enormous pressure on the local currency.

Mbadi stated that the Kenyan shilling, which has remained relatively stable in recent months, could weaken dramatically if oil importers are forced to source large quantities of dollars immediately to finance fuel purchases.

He suggested that under such circumstances, the exchange rate could deteriorate from its current levels to between KSh160 and KSh180 against the U.S. dollar.

According to the Cabinet Secretary, one of the key advantages of the G-to-G arrangement is the deferred payment mechanism, which allows fuel importers to receive petroleum products while postponing payment obligations for several months. 

This reduces immediate demand for dollars in the foreign exchange market and helps ease pressure on the country's currency reserves.

“If there is no deferred payment arrangement, demand for dollars would rise sharply and place significant strain on the shilling,” Mbadi explained, emphasizing that the structure has provided important support for currency stability.

The Treasury boss also rejected claims that Kenya’s fuel pricing challenges are solely the result of domestic policy decisions. He argued that many countries around the world are facing similar pressures due to disruptions in global petroleum markets.

Mbadi linked rising fuel costs to continuing instability in parts of the Middle East, a region that plays a central role in global energy production and supply chains. 

According to him, geopolitical tensions have disrupted traditional supply routes, forcing many countries, including Kenya, to source petroleum products from alternative suppliers located farther away.

He explained that the longer transportation routes have significantly increased shipping and logistics costs, raising the overall price of fuel imports. These additional expenses, he said, are ultimately reflected in the prices consumers pay at fuel stations.

To reduce the impact on households and businesses, Mbadi disclosed that the government has continued implementing fuel support measures aimed at cushioning consumers from abrupt price increases. 

He revealed that billions of shillings have been allocated in recent months to moderate fuel costs and prevent even steeper increases at the pump.

The Cabinet Secretary maintained that while global factors remain beyond Kenya’s control, government interventions have helped shield consumers from the full effects of international market volatility. 

He urged Kenyans to consider the broader economic context when evaluating fuel prices and exchange-rate pressures.

His remarks come amid ongoing public debate over the effectiveness and transparency of the G-to-G fuel import programme. 

Supporters argue that the arrangement has contributed to currency stability and improved fuel availability, while critics continue to question its long-term sustainability and overall impact on fuel pricing.

Economic analysts note that exchange-rate stability remains critical for Kenya because the country relies heavily on imported goods, including fuel, machinery, pharmaceuticals, and industrial inputs.

A significant weakening of the shilling would increase import costs, potentially driving inflation higher and increasing the cost of living.