Kenya was hastening to transfer USD24.8 million to EXIM Bank (United States of America) on March 31, 2023, in overdue payments of a USD831.2 million loan which the government had guaranteed for Kenya Airways (KQ, Nairobi Jomo Kenyatta) in 2014 to purchase seven aircraft and one engine, including six B737-800s and one B777-300ER.

This followed a February demand notice from the bank, which clarified it was part of a standard process and not a default warning, and therefore Kenya did not have to pay the total outstanding amount in one go.

"On March 3, the government of Kenya paid USD37.4 million (KES4.77 billion Kenyan shilling) in overdue principal and is processing the additional overdue principal and interest of USD24.8 million by March 31, 2023," a senior EXIM official said in a statement. "Exim is working closely with the government of Kenya on the next steps to put Kenya on the best path forward for future payments. EXIM has a long history of working with the Kenyan government and Kenya Airways," he said.

The Kenyan government guaranteed the loan in 2017 for ten years until June 2028. In October 2022, it was forced to novate USD525 million (KES68.91 billion) of the debt after Kenya Airways defaulted on payment. By February 2023, the outstanding balance was USD462 million, Kenya's Treasury Principal Secretary Chris Kiptoo told a parliamentary oversight committee on public debt and privatisation.

Kenya Airways had defaulted on both the guaranteed portion of the loan amount and the non-guaranteed portion. The process of novating the debt would be finalised during the 2022/2023 fiscal year, Treasury said in its 2021/2022 Annual Debt Management Report.

As reported, losses from the loan coupled with higher fuel prices saw Kenya Airways report a KES38.26 billion ((USD291 million) loss before tax in the 2022 financial year. The main contributors were fuel costs at KES26.1 billion (USD198 million), financing costs at KES23.4 billion (USD178 million), and fleet ownership costs of KES1 billion (USD7.5 million). "The airline recorded forex losses occasioned by restructuring the guaranteed government of Kenya loans as part of the ongoing financial restructuring programme, negatively impacting the income statement by KES26.4 billion (UDSD200.4 million). If you remove the impact of the forex losses and the abnormal fuel cost increase at 160%, we would have made an operating profit," chief executive Allan Kilavuka told an investor conference last week.