The Kenyan government is set to spend a total of Kes 61.3 billion over the next four years to repay Kenya Airways’ loans, which the government had guaranteed. This comes at a time when the International Monetary Fund (IMF) has been pressuring the government to stop providing financial assistance to the airline. The payments for the multi-billion-shilling loan result from KQ’s inability to service its debts due to years of incurring losses. According to documents presented in Parliament, the payments will increase by Kes 1.43 billion to reach Kes 16 billion in the current financial year, and they are expected to rise further in the subsequent years, covering both interest and principal payments.
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The loan in question was initially taken from the US Exim Bank, with the government guaranteeing a significant portion of it. The Treasury took over the loan six years ago to help the struggling airline, but it has now come under pressure from the US Exim Bank, receiving a default notice for delayed payment of Kes 57.8 billion in December 2022. The IMF, being a significant financier of the Kenyan government, has made demands for reforms at Kenya Airways as a condition for extending credit facilities to the country. The government aims to end its reliance on taxpayers’ money to bail out the airline by December 2023. To achieve this, the government is actively seeking for a strategic investor to help turn the national carrier profitable again.
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The Treasury has set a deadline of 2027 to clear the guaranteed KQ debt in the 2026/2027 fiscal year. The money spent in servicing the loans will be recorded as shareholder loans provided to the struggling Kenya Airways. The Kes 1.43 billion increase in payments for the current financial year includes Kes 1.24 billion in principal payments and Kes 186.43 million in interest payments.
