The Kenyan government settled guaranteed debt of KES12.3 billion shillings (USD85.3 million) of Kenya Airways (KQ, Nairobi Jomo Kenyatta) in the financial year ending June 2023, according to the fourth quarterly review report by the National Treasury.

“The payment is composed of KES10.6 billion (USD73.5 million) as principal payment and KES1.7 billion (USD11.7 million) as interest,” the report is cited by Kenya’s Nation Media Group.

This is a KES2.2 billion (USD15.2 million) increase on the KES10.1 billion (USD70 million) of the guaranteed debt the government had serviced by the end of March 2023, as stated in the Treasury’s third quarterly report published in May 2023.

The government has been paying the airline’s arrears after it defaulted on part of a USD525 million loan from the Private Export Funding Corporation (Pefco), guaranteed by the EXIM Bank (United States of America) and the Kenyan government. The loan was a 12-year facility originally provided by Citibank and JP Morgan Chase Bank before Pefco took it over, with the Exim Bank (US) and the Kenyan government joining as guarantors. The national carrier took out the loan in 2017 to purchase aircraft but defaulted on repayment after facing financial difficulties forcing the government to take over the repayments.

According to Kenyan media, concern exist that the depreciating Kenyan shilling will make it more expensive for the government to settle the airline’s outstanding external debt.

Treasury data shows Kenya Airways’ debt grew by KES2.08 billion (USD14.4 million) in April 2023 due to the depreciation of the local currency, raising the deficit to KES79.09 billion (USD554.4 million) in April, a 2.7% increase from KES77.01 billion (USD535 million) in March 2023.

Kenya Airways posted a record loss of KES38.26 billion (USD265.5 million) in the financial year ending December 2022 due to a rise in financing costs, with its accumulated losses totalling KES172.68 billion (USD1.1 billion).

According to a recent report by the International Monetary Fund (IMF), the Kenyan government is looking for a new restructuring plan for Kenya Airways after putting on hold one prepared in May 2022 as it reassesses the least-cost approach for the national budget. The IMF is pushing for the airline to be weaned off budgetary support by December 2023.