Treasury settles Sh2.7 bn extra Kenya Airways debt


A Kenya Airways plane at the Jomo Kenyatta International Airport. FILE PHOTO | LUCY WANJIRU | NMG

The National Treasury has paid a further Sh2.7 billion in Kenya Airways (KQ) guaranteed debt in the three months to the end of September after inheriting the burden from the national carrier.

The repayments in the quarter include Sh2.37 billion for principal repayments and Sh351.29 million for interest payments, according to data from the Controller of Budget (COB).

The fresh instalment brings cumulative exchequer payments on the KQ guaranteed debt to Sh13.35 billion with the first payment having been done in the quarter ending in December 2022.

“The total amount paid on guaranteed loans during the first three months of FY 2023/24 amounted to Sh2.72 billion, which was payment for Kenya Airways loan comprising of Sh2.37 billion for principal repayment and Sh351.29 million for interest payments,” the COB report noted.

Last year, the Treasury told the IMF it would take over the debt contracted in 2017 from the USA Export-Import Bank (Exim) as facilitation to the better management of risk for the national carrier including the potential call-up of the guarantee.

In February, Treasury Principal Secretary Chris Kiptoo told MPs that the Exim Bank USA had handed in a default notice after the delayed payment of the guaranteed loan by KQ.

Despite paying down more than Sh.13 billion, KQ's guaranteed debt has soared by 13.4 percent since September last year to Sh87.36 billion from Sh76.97 billion, mainly from the sharp depreciation of the Kenyan Shilling.

KQ’s debt takeover by the exchequer, also known as debt novation, is part of a wider restructuring of KQ operations, seeking to support the carrier at the least cost to the government.

The plan is set to further incorporate additional capital injection by the State, cost cuts, among other plans, cost cuts, network optimisation, and the development of key performance indicators for KQ senior executives.

The entire stock of State guaranteed debt closed the quarter ended September at Sh170.94 billion including Sh31.45 billion in guarantees to KenGen and Sh52.07 billion in guarantees to the Kenya Ports Authority(KPA). The two institutions’ loans constitute 48.9 percent of total State guaranteed loans by the end of September, meaning that KQ’s guaranteed loans alone surpass them combined.

The State also guaranteed a Sh52 billion loan for Kenya Power.

Guarantees to KPA and KenGen cover loans for key projects including the Sondu Miriu Hydropower Project, the rehabilitation and expansion of the Hydropower Plant Kindaruma, and the Mombasa Port Development Programme.

Both KenGen and KPA are however currently servicing their guaranteed debts with the only exchequer payments on the arrears covering loan facilities by KQ.

KenGen’s guaranteed loans by the end of September were Sh31.49 billion, having grown slightly from Sh31.1 billion by the end of June 2023.

On the other hand, Kenya Power’s guaranteed loans hit Sh52 billion from Sh50.5 billion by the end of June 2023, marking a three percent growth during the three months

Across the 2023/24 fiscal year, the National Treasury has allocated Sh18.79 billion towards the payment of guaranteed debt.

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