MPs question Treasury over repayment of KQ’s Sh58 billion loan amid profit report
MPs are dissatisfied with the explanation that the loan had been novated under provisions of the Public Finance Management Act.
The National Treasury is under scrutiny after Members of the National Assembly Committee on Public Debt and Privatisation questioned the government's decision to repay a Sh58 billion Kenya Airways (KQ) loan, despite the airline reporting a return to profitability.
During a tense session with Treasury Principal Secretary Chris Kiptoo on Tuesday, June 17, the committee, led by Balambala MP Abdi Shurie, demanded to know how the government moved from being a loan guarantor to assuming full responsibility for repaying the debt initially contracted by KQ.
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MPs were dissatisfied with the explanation that the loan had been novated under provisions of the Public Finance Management Act.
According to the PS, the government guaranteed a loan from Exim Bank worth approximately Sh58 billion in 2017.
Kiptoo said KQ struggled to meet its financial obligations, prompting the bank to issue a demand notice and the airline to request Treasury intervention.
“The government therefore novated the full amount of the loan amounting to Sh58 billion and has entered into a loan agreement with KQ,” Kiptoo told the committee, citing Section 61(2) of the PFM Act that allows the cabinet secretary to restructure debt if there’s a chance of recovery.
“Section 61(2) of the PFM Act Cap 212 states that; where Cabinet considers that the debt is more likely to be recovered if the borrower is allowed to pay the debt over a period of time, the Cabinet Secretary may enter into an agreement with the borrower to pay the debt over that period and at such intervals, and subject to such terms and conditions, as may be specified in the agreement,” Kiptoo said.
But lawmakers argued that the airline, now claiming to be profitable, should take full responsibility for its loans.
“KQ should take up their mess and deal with it. It is unacceptable since KQ is now making a profit. Why is the government still paying for their loans? It is an abuse of taxes, and KQ should take up their responsibility and repay their loans,” said Kinangop MP Zachary Thuku.
“Why repay debts for someone who is making a profit? Through media reports, KQ has been boasting of how it is making profits,” added Wajir East MP Aden Daud.
Defending the move, Kiptoo said it is not uncommon for the government to step in for entities like KQ, noting that similar support had previously been extended to Kenya Power. He added that KQ’s reported profitability might only be a “book declaration.”
The committee now plans to summon KQ to provide a detailed explanation of the airline's financial status and why the burden of its debt is being shifted to taxpayers.
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