The National Treasury has slashed sh10 billion, in support of Kenya Airways (KQ) as the bailouts start.
According to documents for the first 2022/23 supplementary budget, the government plans to revise the amount allocated to KQ from the initial Sh30 billion to Sh20 billion.
National Treasury had in December disclosed to the International Monetary Fund that it would provide Sh34.95 billion to Kenya Airways including assumed payments for debt service.
The state, which owns at least 48.9% of the carrier, has bailed KQ out several times.
Earlier this year, the exchequer in its draft 2023 Budget Policy Statement said it was winding up support to the national carrier, setting a deadline of December this year for an end to persistent bailouts to the carrier.
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“To support the aviation industry, the government will develop a turnaround strategy for Kenya Airways. A critical plank of this strategy will be a financing plan that does not depend on operational support from the exchequer beyond December 2023, said the Treasury.
The Kenyan government is currently in the process of restructuring the debt of Kenya Airways, which has become a financial burden, with the total guaranteed debt amounting to 60.7 billion Kenyan shillings ($485 million).
“As part of the ongoing discussions, the government has settled outstanding debt service arrears on the guaranteed loan as of the end of September 2022 and additional amounts through End-June 2023 on debt service payments on the guaranteed amount have been included in the Supplementary Budget,” the National Treasury added.
“All payments paid on behalf of KQ are deemed shareholder loans and shareholder agreements with agreed term sheets that are being prepared.”