National Treasury has defended Kenya Airways’ (KQ) Ksh58 billion loan amid concerns that it will be paid through domestically sourced debt at an average rate of 13 per cent.

The loan is set to be paid within a period of 15 years at an interest rate of 3 per cent, a rate that sparked concerns among the Departmental Committee on Public Debt and Privatisation members.

The loan has a grace period of five years, and the actual amount, together with the interest rate, is set to be paid within 10 years.

Appearing before the committee on June 17, 2025, Chris Kiptoo, the National Treasury Principal Secretary, stated that the Kenyan Government was obligated to take charge of the loan due to the previous guaranteeing arrangement.

“When these debts were contracted, the government of Kenya provided a guarantee. Following the normal channel, where you have the government approval, then extended to the National Assembly, the guarantee was approved by the National Assembly,” he explained.

According to him, if the Airline is unable to meet its obligations, the government is obligated to settle the obligations since it is the guarantor in this regard.

Kwenya Thuku, a member of the committee, sought to understand why the government was paying for the loan despite it only holding 48 per cent of the debt, despite the airline recently flying to a profit and having the majority shareholders being private individuals.

“The government of Kenya or the people of Kenya just own 48 per cent while 52% is owned by private entities, and here we are, novating and taking the burden. You’re a public. And you know all the problems you have in Kenya. Now we’re taking over another burden for a private company. How do you then pay money for somebody who is just saying that they are making this much profit?” he asked.

However, Kiptoo noted that KQ stands at a pivotal point in the economy as it also impacts other critical sectors such as tourism, thus they had to step in to prevent instances of debt default.

“The key hidden principle here is because of the strategic nature of Kenya Airways, that, you know, this is the entity that anchors our tourism and also exports in the country. And, of course, the country we own, it’s a government-owned organisation, where the government is the single largest shareholder,” he argued.

He added that this is not the first time the government has bailed out a private entity, as the same has already happened before with other organisations.

“Of course, there is the issue of the private sector, and this does not only apply to KQ. We have also seen Kenya Power, where we have come in to support Kenya Power when it has problems as a government, even though it has private shareholders. It’s also an unusual way the government intervenes to support the private sector and you have seen in markets where you have problems, the government comes in for the larger interest of the nation,” he argued.

Kiptoo explained that KQ had been servicing the debt from 2014 until 2017, when it started facing headwinds and initiated a restructuring of the facilities.