Uganda and Kenya have signed an agreement that will enable the landlocked country to maintain stable oil supplies to avert rampant inflation caused by rising fuel prices.

Under the agreement signed between Kenya's Ministry of Energy and Uganda's Ministry of Energy and Mineral Development, Kenya is committed to increasing petroleum products to Uganda to meet rising demand caused by increased industrial growth, local press reported on Wednesday.

Uganda has registered unprecedented industrial growth this year, that has increased oil demand, pushing up prices and raising fears of high inflation.

Uganda recently also faced temporary shortage of fuel supply after the Kenya Revenue Authority (KRA) adopted a new policy of collecting tax from petroleum products.

Uganda has an additional demand of 18 million liters of oil per year, which is still expected to increase in 2006.

The agreement, also signed by the KRA, Uganda Revenue Authority and the Kenya Pipeline Company (KPC), provides for enhanced coordination by the two tax authorities and faster clearance of export consignments at Eldoret and Kisumu depots for transit to Kampala.

The KPC's chief technical manager Absalom Kosgei said the company had technical and financial muscle to meet Uganda's increasing demand without compromising Kenya's supplies.

He said the KPC would meet the new demand by easing congestion at the Eldoret and Kisumu depots and maximizing usage of Nakuru depot, which is operating below capacity.

Kosgei said Nakuru, which is distributing 180 million liters of oil every year, was operating at 37 percent capacity.

He said Nakuru's distribution capacity would be raised to 550 million liters annually to meet the rising demand.

Source: Xinhua