Oil marketers accuse Ruto administration of shortchanging them after converting debt into bond

Oil marketers claim President Ruto administration is arm-twisting to convert the debt of the fuel subsidy into bond.

The government arm-twisted oil marketers to convert Sh45.8 billion arrears of the fuel subsidy into a bond, as the Kenya Kwanza administration runs out of fiscal space, hurting its ability to settle pending bills locally.

Oil marketers disclosed Early this month, state officials told them of their decision and warned them that if they rejected it, they would lose out on the payout of the billions.

Although a majority of the dealers are reported to have declined, the government claimed earlier this month that it had reached an arrangement with oil marketers to convert the Sh45.8 billion in subsidy arrears into a three-year government paper.

The conversion 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 payments without disrupting other operations.

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“Companies were either to convert the debt to bonds or be willing to wait longer without any defined timelines. This came from the government but was made to look like it came from oil companies through the Petroleum Institute,” one of the executives said.

“That (bond) was the only option on the table, otherwise it (Sh45 billion) goes the yield shift route,” said another oil dealer.

The first tranche of the bond seeking to raise Sh17.5 billion was issued last week at a rate of 14.22 percent.

The second tranche of the remaining Sh28 billion bond will be issued in the second week of July, with the government admitting that it was forced to split the bond due to the Exchequer’s thinning fiscal space in the year.

The Treasury has been struggling to compensate the oil marketers for the fuel stabilization scheme that was rolled out in April 2021.

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