Deputy President Rigathi Gachagua issued a warning to investors on Thursday, April 13, regarding the value of the dollar and the shilling in Kenya.
Speaking while receiving the first consignment of imported petroleum from the United Arabs Emirates (UAE) under a government-to-government deal, Gachagua stated that the value of the dollar would decrease starting April 14, while the value of the shilling would increase.
Gachagua urged Kenyan investors and businesspeople who have been hoarding dollars for speculation purposes to offload their dollars in the market immediately to avoid losses.
He stated, “It’s a piece of honest advice from a truthful man. With what has happened and the 500 million dollars used to purchase fuel every month, the demand for the dollar will come down and the shilling will gain, and we don’t want Kenyans to lose money.”
Gachagua explained that the importation of oil in shillings would relieve pressure on the dollar and allow for its normal circulation in the market.
He further reiterated that the government would not subsidize products in the country, as it was not a sustainable move. Instead, Gachagua revealed that the government would subsidize the production of different products to reduce their costs.
“This is the way to bring down the cost of fuel. That strategy of fuel subsidy is not sustainable. We want to dismiss with contempt those who are calling us and telling us to reinstate subsidized consumption, it cannot work.
The government will subsidize production because it is sustainable. This is the practical way of dealing with the high cost of fuel and other products in the country,” Gachagua stated.
Gachagua also highlighted that stabilizing the exchange rate of foreign currencies would support economic recovery and help address the issue of public debt.
He explained that the petroleum imports, which are paid for in dollars, have strained the country’s foreign exchange reserves, causing difficulties in US dollar liquidity and resulting in the rapid depreciation of the Kenyan shilling. However, Gachagua expressed optimism that the country would benefit from the accumulation of foreign reserves of approximately Ksh403 billion (3 billion US dollars) in the next six months.
The deputy president’s warning comes after Energy Cabinet Secretary Davis Chirchir published new regulations in January 2023 regarding fuel importation into the country, which involved a government-to-government arrangement for the procurement of oil.
The regulations required oil companies to competitively bid for the deal through an open-tender system. However, with the current 9-month deal, the 96 companies will be left in the cold and can only seek to bid in 2024.
