Confusion Over KQ Loan As MPs Question Govt’s Role In Repayment

Members of the National Assembly Committee on Public Debt and Privatisation have questioned the government’s decision to take over Kenya Airways (KQ) loans, despite the airline recently declaring profits.

During a session with National Treasury Principal Secretary Dr. Chris Kiptoo, the Committee, chaired by Balambala MP Abdi Shurie, pressed for answers on how the government moved from being a guarantor to the actual payer of the loan.

Treasury officials explained that in 2017, the government guaranteed a loan of $525 million (about Sh58 billion) that KQ had borrowed from Exim Bank. However, due to financial challenges, the airline failed to meet its loan obligations, prompting Exim Bank to issue a demand letter. KQ then asked the Treasury to settle the outstanding amount, as per the terms of the guarantee.

Dr. Kiptoo cited Section 61(2) of the Public Finance Management Act, which allows the Cabinet Secretary to restructure debt repayment if it’s deemed more recoverable that way.

“The government therefore novated the full loan amount and signed a new repayment agreement directly with KQ,” he said.

He added that it’s not the first time the government has taken over loans from struggling state-linked companies, noting that Kenya Power had received similar support.

However, MPs were unconvinced, especially since KQ recently announced it had returned to profitability. PS Kiptoo said that such profit declarations may only be on paper and not reflect actual cash flow.

The Committee now plans to summon KQ management to clarify the financial situation and the role of the government in the loan repayment process.