MPs shocked as Treasury issues billions in loans to Kenya Airways without signed agreements

Members of Parliament were on Tuesday shocked after learning that the Treasury had advanced large loans to Kenya Airways between 2019 and 2023 without any signed agreements, exposing potential risks of mismanagement of public funds.

Disclosures by the Auditor General showed that Sh10 billion was given to the airline in 2022/2023 as an on-lent loan, taking its total loan exposure to Sh41.27 billion over the period.

The Public Accounts Committee (PAC) session, chaired by Vice Chairperson and Garissa County Woman Representative Amina Udgoon Siyad, examined the Auditor General’s report highlighting possible losses of public funds, unapproved spending and violations of financial management laws.

“We are dealing with very serious questions of accountability. These are huge sums of public money, and Kenyans deserve clear answers on where their taxes are going,” Amina told Treasury officials.

The audit revealed that the loans were issued before formal agreements were signed, a revelation that alarmed committee members.

“This Committee finds it unacceptable that billions were released without any signed agreements. How does the Treasury justify lending public money informally?” Amina posed.

The Auditor General further reported that accrued interest and penalties had increased the total loan to Sh43.048 billion by December 2022. Additionally, the government paid Sh12.326 billion on behalf of Kenya Airways to settle a defaulted foreign loan, including Sh7.8 billion spent under Article 223.

“We did not see any documentation showing how the Treasury intends to recover these amounts from Kenya Airways. There is no repayment plan, no security offered, and no formal agreement,” a representative from the Auditor General’s office told PAC.

The audit concluded that the recoverability of Sh55.37 billion owed by the airline “could not be confirmed.”

PAC also scrutinised the Treasury’s Sh6.196 billion expenditure to acquire a 60 per cent stake in Telkom Kenya under Article 223. MPs noted that Parliament had never approved the spending.

“This is a clear breach of the law. You cannot spend over Sh6 billion and then hope Parliament will rubber-stamp it afterwards,” Funyula MP Wilberforce Oundo said.

The Auditor General confirmed that the propriety of the entire transaction could not be authenticated, stating, “Parliament’s approval is not optional. Without it, the transaction remains irregular.”

The audit additionally exposed wasteful expenditure arising from delayed payment to a contractor, resulting in Sh97.27 million in interest and legal fees. The Ministry had acknowledged owing Sh235.6 million, but failure to settle the debt led to a court award of Sh327.19 million.

“This is a classic case of negligence. Taxpayers should not bear the burden of interest and legal fees that could have been avoided with timely action,” Amina said.

PAC directed Treasury officials to present all relevant documentation, including loan agreements, repayment frameworks and justification for invoking Article 223.

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“We want to see the loan agreements, the repayment frameworks, and the justification for invoking Article 223. If this paperwork does not exist, then someone must take responsibility,” Amina warned.