The government is racing against time to pay Sh12 billion as part of a loan that it guaranteed Kenya Airways six years ago.
The Treasury's disclosures tabled in Parliament show that Sh2.8 billion ($22.9 million) has been paid to the US Exim Bank against Sh14.8 billion ($118.1 million) due in the current financial year ending June.
The government is expected to shoulder the heavy burden of settling the national carrier’s debt which it guaranteed after the company’s losses left it unable to pay its loans.
“In the 2022/23 financial year, $118.1 million (Sh14.8 billion) is due for payment of which $22.9 million (Sh2.8 billion) has already been paid by the guarantor,” Treasury says in a report tabled before Parliament.
The balance comes at a time when the US lender slapped the Treasury with a default notice in December last year amid a cash crunch occasioned by the servicing of Chinese debt.
A huge chunk of the national debt servicing goes to Beijing for loans that the government tapped to fund infrastructure projects like the Standard Gauge Railway.
The Treasury has a controlling 48.9 percent stake in Kenya Airways which it has been bailing out over the years amid losses from its passenger and cargo operations.
KQ, as the carrier is known by its international code, originally had loans amounting to $842 million (Sh74 billion at an exchange rate of 88) of which the government guaranteed portion to Exim Bank USA was $525 million (Sh46.2 billion).
The guarantee was approved by Parliament in 2017.
Part of the debt had been over time and the outstanding balance as of December stood at $462.5 million (Sh58.9 billion at current exchange rates).
The Treasury is expected to have completed the guaranteed KQ debt in the 2026/27 fiscal year and the money it will have spent will be reflected as shareholder loans to the struggling carrier.
“The loan was expected to be fully serviced by the end of full-year 2026/27, after which the government as per section 61 of the Public Finance Management Act would recover the sums of money paid, as shareholder loans,” Treasury said.
KQ narrowed its loss in the half year ended June 2022 to Sh9.8 billion from the Sh11.48 billion loss it recorded in a similar period the previous year.
The company has issued a profit warning for the year ended December 2022, citing foreign exchange losses that are anticipated to overshadow revenue growth. This means that the NSE-listed firm will post a larger loss in the review period, having recorded a net loss of Sh15.8 billion in the prior year.
The weakening of the shilling has hurt the profitability of scores of companies by, for instance, inflating their liabilities denominated on foreign currencies. Negative foreign exchange movements can also diminish the value of sales made outside Kenya.
