The International Monetary Fund (IMF) has set tough conditions for Kenya Airways (KQ) bailout blocking further funding of the airline in the coming years.
The International Monetary Fund (IMF) has put forward tough measures for KQ bailouts, blocking the airline’s future funding to turnaround results in order to avoid wastage of taxpayers’ money.
In recent years, the airline that is expected to undergo a reconstruction which will cost more than Sh118billion has suffered serious cash flow problems rendering it impossible for the airline to pay pending debts.
IMF issued a report saying, “steadfast implementation of Kenya Airways reconstructing plan with clear accountability linking exchequer support to progress on key performance metrics remains essential to achieving least-cost approach, even as KQ’s debt servicing needs for both guaranteed and unguaranteed amounts are being addressed and options are being sought to achieve cost savings in debt service.“
In the beginning of this year, the airline appointed USA-based advisory firm, Seabury Consulting to guide the airline on the financial reconstructing and revival plan.
In a budget document put before the National Assembly in April, the Treasury decided that they will allocate KQ a further Sh36.6billion bailout for the year 2022/2023 to prop out the national carrier as it recovers from the Covid-19 pandemic, this allocation came weeks after a Sh20billion bailout for the airline was approved by MPs.
The Sh36.6billion allocation labeled, a strategic government investment, is expected to push state support for the airline to Sh56.6billion in one year.
Earlier this year, the government, which has 48.9 per cent shares in KQ, abandoned plans to nationalise the airline.
This plan which was approved by lawmakers in July 2019 would remove the airline from the list of the Nairobi Securities Exchange.
In this case, the government was trying to copy countries such as Ethiopia, which operate air transport assets from airports to fueling all under one firm, using funds from the more profitable parts to support others.