Kenya has been issued a default notice over failure to repay Ksh.57.7 billion.
The notice was issued by the United States of America’s Exim Bank in what it termed as a failure by Kenya Airways (KQ) to honour the repayment plan.
The loan in question, according to a Business Daily report was a 12-year facility, issued when the Shilling traded at Ksh.84 against the US Dollar. Today, the currency has depreciated to Ksh.125.
The facility was initially provided by Citi Bank and JP Morgan before Private Export Funding Corporation (PEFCO) took it over and in turn, Exim and Kenyan government joined in as guarantors.
“We have an outstanding balance of Ksh.57.77 billion. A default notice has been issued by the guaranteed lender which is US Exim Bank which has called on the government of Kenya to pay,” said Treasury Principal Secretary Chris Kiptoo.
According to the PS, the exchequer has little headroom to honour the repayment plan but has no choice.
“Now we don’t have, to say the truth, enough headroom to pay, but what is important is to pay,” Dr Kiptoo told the committee on Public Debt and Privatisation.
The airline has been surviving on bailouts since the advent of the coronavirus pandemic in March 2020.
Business Daily reports that KQ defaulted on part of Ksh.64.6 billion, a loan from PEFCO of the US and guaranteed by the Exim Bank of USA which, in turn, was guaranteed by Kenya.
Exim Bank has been in existence for 89 years. Among its core businesses is providing direct loans, commercial loan guarantees, export credit insurance and working capital guarantees for American exporters.
Between 2016 and 2020, the State advanced KQ Ksh.35 billion.
In the financial year ended June 2022, the State advanced the airline with Ksh.26.6 billion. In the current fiscal year, 2022/23 former Treasury CS Ukur Yatani allocated KQ Ksh.36.6 billion.
This brings total bailouts to Ksh.98.2 billion.
KQ is expected to receive a further Ksh.103 billion from the state to settle its runaway debt in what the International Monetary Fund (IMF) said would help the airline cruise through the financial turbulence that has for long characterised its operations.