Treasury put on the spot over guaranteed KQ loan
By Victor Mukabi, June 10, 2025National Treasury has been put on the spot over the use of public funds to guarantee a Sh58 billion loan for Kenya Airways, yet the government is a minority shareholder.
A Parliamentary committee on public debt and privatisation now wants Treasury to explain the logic behind this, as the government used a domestic loan, which was accessed at an average interest rate of about 13 per cent, which will be paid back at an interest rate of 3 per cent within a period of 15 years.
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.
“Why are we shortchanging the public? We borrow the treasury bills and bonds at a rate of about 13 per cent to pay a loan of 3 per cent. We need the public to know because this was signed by CS John Mbadi and Davis ChirChir, the minister for transport and roads, on behalf of the Kenyan government, and by Allan Kilavuka, on behalf of Kenya Airways,” the MPs posed.
The debt generally becomes part of the public debt as per the constitution due to being guaranteed by the government.
Guaranteed scheme 08
While this binds the agreement, the MPs still questioned the rationale of the guaranteed scheme as the national carrier recently flew back to profitability years after recording continuous losses.
In March this year, it announced an after-tax profit of Sh5.4 billion for the financial year ending December 31, 2024, representing a remarkable turnaround from a loss of Sh22.6 billion reported the previous year and reflecting an improvement of Sh28 billion with a 124 per cent increase in net profit.
“This should disturb every Kenyan because KQ is a business entity whose shareholding is in question as far as how much is public interest in Kenya Airways. How is it that we are bearing the burden to pay a debt for an entity that is making profits?” the MP asked.
This, according to them, is unjust as the shareholder of the airline will be earning their dividends as the public continues to bear the brunt of the said loan.
“It cannot be that the Kenyan people are bearing the burdens of businesspeople who are making a profit. We need to look at this contract from a deeper lens, and Kenya Airways must appear before this committee so that we know if there is an issue. We cannot continue doing this here,” the MPs demanded.
While appearing before the committee, the National Treasury Principal Secretary, Chris Kiptoo, who presented on other factors such as the public debt and securitisation of funds, was unable to answer the new set of questions as he had to attend other meetings that were also critical.
Serious restructuring
This forced the house to reschedule the sitting for a later date, which they have yet to communicate.
On March 5, 2025, while addressing the National Assembly Departmental committees at a Nairobi hotel, National Treasury CS John Mbadi dismissed the reports that the airline was in fact doing well, noting that it also needs some serious restructuring.
“The real story is that KQ is struggling, even as we speak, KQ is still seeking funding from the government to the tune of Sh26 billion to repair and bring back engines for the aircraft to service the condition, I think about eight of them,” he said.
“In fact, when you sit with them, you can paint a very good picture of what is likely to happen, so when they could be making some more profits, but KQ needs serious restructuring,” he revealed.
According to Mbadi, the government has had to bail out the airline multiple times, guaranteeing its debts due to the financial challenges it has been going through over time.
Ideally, if the airline defaults on its debt obligations to creditors, the government steps in to guarantee them since it becomes a national interest.