Kenya Airways debt guaranteed by the government rises by 17.3%
- Published By Jedida Barasa For The Statesman Digital
- 4 months ago
Kenya Airways’ (KQ) commercial debt which is guaranteed by the government increased by 17.3 percent in the year to December 2023 driven by a weak shilling.
According to data from the National Treasury, this debt rose to Sh92.29 billion, which is an increase of Sh13.64 billion from a balance of Sh78.65 billion in December 2022.
This amount includes the Sh69.9 billion debt that KQ took from the USA Export-Import Bank (EXIM) in 2017 but defaulted on. The government is now servicing this debt on behalf of the airline.
The Treasury, in the 2024 Budget Policy Statement (BPS), said the national carrier is one of three entities that had their loans guaranteed by the government to a tune of Sh177.229 billion.
The increase in the KQ’s State-guaranteed debt underlines the headache that the rapid depreciation of the Kenyan shilling against major world currencies is having on the country’s pile of external debt.
During the period, the Kenyan shilling depreciated by 25 percent against the US dollar, trading at an average of Sh122.44 in December 2022 to Sh153.15 in December last year, according to Treasury data.
State-guaranteed debt is payable by the government should the borrowing entity default on it, and as such is classified as part of the country’s external debt.
In settling part of the defaulted KQ debt, the Treasury paid Sh6.9 billion in the quarter to December 2023, which consisted of Sh5.5 billion as principal payments and Sh1.4 billion as interest.
This means that to date, the government has paid Sh53.7 billion out of the defaulted Sh69.9 billion KQ debt.
The airline took out the loan in 2017 to purchase aircraft but defaulted on repaying it after facing financial difficulties forcing the government to take over repayment of the debt as part of its guarantee.
The airline remains in huge debt, with its total outstanding liabilities hitting Sh302 billion by June 2023, according to the International Monetary Fund (IMF). The company is in a negative equity position of Sh133 billion.
This comes at a time the government has directed KQ to onboard a consultant to support the onboarding of an equity investor who can inject capital into the business.
“The procurement of the consultant is in the final stage and should be completed by the end of December 2023 with the aim of closing the deal by the end of June 2024,” said the IMF.
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