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Oil traders are calling for striking the arms of the state to convert debt into bonds
Monday, June 26, 2023
A fuel worker carries a fuel pump at a filling station along Kimathi Street. file image | NMG
The government has polluted oil marketers to convert Sh45.8 billion in arrears of fuel subsidies into bonds, as the Kenyan Kwanzaa administration runs out of fiscal space, hurting its ability to settle outstanding bills domestically.
Oil marketers said to The daily business State officials informed them of the decision early this month, adding that they risk losing billions in payment if they reject the proposal.
The government said early this month that it had struck an agreement with oil marketers to convert Sh45.8 billion in subsidy arrears into a three-year government note, but that was said to have been rejected by most dealers.
is reading: Fuel traders are in a deal to convert Sh45 billion in subsidy arrears into bonds
The transfer is set to ease the burden of making billions of shillings in a one-off payment as the government races to ensure it does not default on foreign debt without disrupting other operations.
Companies either had to convert debt into bonds or were willing to wait much longer without any set timelines. This came from the government but it appears it came from the oil companies through the Petroleum Institute,” said one of the executives.
Another oil trader said, “This (bond) was the only option on the table, otherwise it (45 billion shekels) will follow the path of yield transfer.”
Principal Treasury Secretary Chris Kipto did not respond to our inquiries regarding the claim.
The first tranche of bonds, seeking to raise Sh17.5 billion, was issued last week at a rate of 14.22 per cent.
is reading: Kenya is offering bonds worth 17.5 billion shekels to pay the wages of oil marketers
The second tranche of the remaining Sh28 billion in bonds will be issued in the second week of July, with the government acknowledging that it had to split the bond due to dwindling Treasury fiscal space in the year.
The Treasury Department is struggling to compensate oil marketers for the fuel stabilization plan that was introduced in April 2021.
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