We will continue supporting KQ, Treasury PS Kiptoo says

National Treasury PS Dr Chris Kiptoo before Finance and National planning committee at Parliament, Nairobi on March 6, 2023 [Elvis Ogina, Standard]

The government has announced it will continue to support Kenya Airways (KQ) through budgetary allocations.

Speaking before the National Assembly Finance Committee, Treasury Principal Secretary (PS) Dr Chris Kiptoo said even if KQ folded, the government will still have to pay a debt of Sh14.7 billion.

According to PS Kiptoo the Jubilee administration on November 14, 2017, guaranteed a Sh96 billion loan to support the loss-making airline, which has yet to be repaid.

"There is a conversation on options to restructure KQ," PS Kiptoo said.

The government allocated KQ Sh36.6 billion to help with its reorganisation in the budget for the current financial year ending June 2023 as part of the Government's strategic investments in public enterprises. This will bring the total amount of capital injected into the troubled airline by the State to Sh63.2 billion after it was awarded Sh26.6 billion in the financial year ending June 2022.

Way forward for KQ

Kiptoo said Treasury will make its proposals to Cabinet on the way forward for KQ adding that at the moment the government has no option but to pay the loans.

The committee chair and Molo MP Kuria Kimani sought to determine the total debt the KQ owes its creditors.

"The stock of debt is Sh78.65 billion as of December 2022," Kiptoo said.

Kiptoo also revealed that the airline had embarked on measures to restructure based on the agreements that were made when the support was extended to the airline in 2017.

"We are in a catch-22 situation where you either deal with the totality of the problems at KQ or you, support them with the hope that they will recover and convert the business to a more profitable business," said an official from Treasury.

To meet the Kenya Kwanza 2023/24 budget, Kiptoo said Treasury is working with Kenya Revenue Authority to enhance the tax base and increase compliance.

He said that Treasury had held meetings with ministries on areas in which they can reduce their expenditure.

"Last week and this week we had meetings with every ministry to look at the entire budget and see areas of potential saving," he said.

IMF report

In July 2022, The Standard reported that the Government will pay KQ's debt of Sh102.8 billion. The decision was aimed at helping the national carrier cruise through the financial turbulence that has for long characterised its operations, according to a country report by the International Monetary Fund (IMF).

"Guaranteed and unguaranteed debt, totaling $868.7 million (Sh102.8 billion) as of March 2022, are expected to be serviced by the Government and discussions are ongoing with KQ's creditors," says the IMF in its third review of the Sh276 billion programme.

Loss-making history

KQ, whose shares have been suspended from trading at the Nairobi Securities Exchange (NSE), has been in the red since 2012, hitting a record net loss of Sh36.2 billion in 2020 as the containment measures against Covid-19 ravaged international travel.

The national airline is reported to have defaulted on payment of interest on a Sh25 billion State loan, with the airline seeking a waiver.

Between 2016 and 2020, the State has advanced KQ Sh35 billion, bringing the total loans to the airline to Sh98.2 billion.

Further, if the Sh85.2 billion State guarantees for loans taken by the airline by the end of June 2020 are added, as contained in its annual report, then taxpayers are staring at a possible liability of Sh183.4 billion should the firm default.