The National Treasury has slashed Sh10 billion in support to Kenya Airways (KQ) as the exchequer begins unwinding bailouts to the company.
Documents from the first 2022/23 Supplementary Budget indicate the government plans to revise the amount of capital injected into the national carrier to Sh20 billion from the initial Sh30 billion.
Previously, the National Treasury had in December disclosed to the International Monetary Fund that it would provide Sh34.95 billion to Kenya Airways including assumed payments for debt service.
It said that it disbursed Sh10 billion in September 2022. The State, which holds the largest share of the carrier at 48.9 percent, has persistently bailed out KQ in recent years, pouring in at least Sh35 billion between 2016 and 2020.
Earlier this year, the exchequer in its draft 2023 Budget Policy Statement said it was winding up support to the national carrier, setting a deadline of December this year for an end to persistent bailouts to the carrier.
“To support the aviation industry, the government will develop a turnaround strategy for Kenya Airways. A critical plank of this strategy will be a financing plan that does not depend on operational support from the exchequer beyond December 2023,” said the Treasury.
Kenya Airways has remained a burden to the exchequer with the government currently involved in the rounding off of a novation/takeover process for the carrier’s guaranteed debt amounting to Sh60.7 billion ($485 million).
“As part of the ongoing discussions, the government has settled outstanding debt service arrears on the guaranteed loan as of the end of September 2022 and additional amounts through end-June 2023 on debt service payments on the guaranteed amount have been included in the Supplementary Budget,” the National Treasury added.
“All payments paid on behalf of KQ are deemed shareholder loans and shareholder agreements with agreed term sheets that are being prepared.”
As of November 17, 2022, the total value of KQ’s debt portfolio was Sh104.4 billion ($835 million) including all debts, loans, letters of credit facilities and convertible equity amounts.
Source: Business Daily