Despite the push for autonomy of some state entities, guaranteed debt is emerging as a thorn in the government's flesh in its privatisation push.
As of December 2022, Kenya Airways held the majority portion of government-backed debt, with Sh78.66 billion out of the total Sh151.08 billion.
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 constituted 48.9 percent of total state guaranteed loans by the end of September, meaning that KQ’s guaranteed loans alone surpass the two combined. The state also guaranteed a Sh52 billion loan for Kenya Power.
Kenya was forced to pay Sh2.7 billion debt owed by national carrier in the first three months to September 2023, despite Treasury having withdrawn support for the airline in June.
This followed an earlier government settlement of Sh13.4billion ($85.51 million) in the financial year ending June 2023, shedding fresh light on the growing burden of struggling state-owned entities on taxpayers.
This is according to a report by the Office of the Controller of Budget (OCOB) Margaret Nyakango.
KQ was among several State entities that the Treasury had denied funding in the financial year starting July 1, to pave the way for the International Monetary Fund led restructuring plan.
In its July 2023 status report on Kenya, the IMF stated that a detailed business restructuring action plan for Kenya Airways prepared in May 2022 'has been put on hold to reassess the least-cost approach for the [national] budget'.
The second batch of payment came ahead of the December deadline that IMF had proposed for the government to cut off all budgetary support for the airline.
“During the quarter ending September 2023, the national government paid Sh2.7 billion guaranteed debts on behalf of Kenya Airways. The payment composed of Sh2.4 billion as principal payments and Sh0.4 billion as interest,” Nyakang’o said in the report.
The exchequer's debt takeover of KQ, also referred to as debt novation, is a component of a larger reorganisation of KQ's operations, with the goal of supporting the carrier at the lowest possible cost to the government.
The airline has five shareholders Government of Kenya, which owns 48.9 percent, KQ Lenders 2017 Ltd, 38.1 percent, Netherlands carrier KLM, 7.8 percent and about 75,000 investors holding a 2.8 percent minority stake, 2.4 percent is held in an Employee Share Ownership Plan.
However, things are now promising for the airline after it was ranked among the 10 best performing airlines in Middle East & Africa according to a new report by aviation analytics firm Cirium.
The 2023 On-Time Performance Review showcases the airline industry’s performance rebound.
It shows that the national carrier had 41,905 total flights in 2023 with a 98.09 completion factor.
