Kenya has disbursed 35.3 billion shillings ($238.84 million) to Gulf companies as part of the government-to-government fuel import credit scheme, a senior government official has disclosed.

The first three letters of credit (LoCs) issued under the arrangement have been settled before maturity but it did not distort the forex market, Business Daily newspaper reported, citing National Treasury Cabinet Secretary Professor Njuguna Ndung’u.

The government-to-government plan has been de-risked and more financing parties have joined in with others at advanced stages, he added.

The names of the Gulf companies were not mentioned.

The scheme concluded between Kenya and the governments of the UAE and Saudi Arabia aims to reduce forex pressures by eliminating the spot buying of fuel and delaying the payment estimated at $500 million monthly. 

Kenya set up an interest-bearing escrow account into which the proceeds from the sale of fuel sourced through the deal are deposited. The move aims to mitigate some of the foreign exchange risks.

As part of the arrangement, shillings for petrol and diesel imports are credited to a different escrow account, which is later converted into dollars as the maturity of the letter of credit nears.

The dollar escrow account currently holds $1 billion, while the Kenya shillings escrow account holds 115 billion. 

(Editing by Seban Scaria )