Treasury on the pot over Sh55billion loans to KQ, Sh6.2billion Telkom deal
The National Cabinet Secretary John Mbadi is on the spot after the National Assembly Public Accounts Committee demanded explanation after an audit by Auditor General Nancy Gathungu’s office flagged unapproved spending, missing loan agreements, and questionable Article 223 transactions involving more than Sh60billion.
PAC raised red flags over Sh55billion advanced to Kenya Airways (KQ) and the controversial purchase of Telkom Kenya shares at a cost of Sh6.2billion.
Further, the committee chaired by committee Vice Chairperson and Garissa County Women Representative Amina Udgoon Siyad questioned the seemingly avoidable expenditure arising from the delayed settlement of court awards, during a session probing the National Treasury’s audit for the financial year ending June 2024.
They cited the National Treasury for the loss of public funds, unapproved spending, and breaches of financial management laws.
“We are dealing with very serious questions of accountability,” Siyad told Treasury officials. These are huge sums of public money, and Kenyans deserve clear answers on where their taxes are going,” she lamented.
The audit also showed the government paid Sh12.326billion on behalf of the airline to settle a defaulted foreign loan which included Sh7.8 billion spent under Article 223.
According to the audit, the National Treasury transferred Sh10billion to Kenya Airways in 2022/2023 as an on-lent loan, raising the airline’s total loan exposure to Sh41.27billion disbursed between 2019 and 2022.
PAC heard that the loans were issued before formal loan agreements were signed, a revelation that shocked lawmakers.
“This committee finds it unacceptable that billions were released without any signed agreements. How does the Treasury justify lending public money informally?” Siyad posed.
The Auditor-General further reported that accrued interest and penalties pushed the total accumulated loan to Sh43.048 billion by December 2022.
In addition, the government paid Sh12.326billion on behalf of the national carrier 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. As a result, the audit concluded that the recoverability of Sh55.37 billion owed by Kenya Airways “could not be confirmed,” a representative from the Auditor General’s office told the committee.
PAC also examined the Treasury’s expenditure of Sh6.196billion to acquire a 60 per cent stake in Telkom Kenya, a transaction undertaken under Article 223.
While the Treasury later sought parliamentary approval, MPs noted that the National Assembly never approved the spending.
“This is a clear breach of the law,” Funyula MP Dr. Wilberforce Oundo remarked.
“You cannot spend over six billion shillings and then hope Parliament will rubber-stamp it afterwards.”
The Auditor-General affirmed that the propriety of the entire expenditure could not be authenticated, telling the Committee: “Parliament’s approval is not optional. Without it, the transaction remains irregular.”
The audit also exposed wasteful expenditure linked to the delayed payment of a contractor, resulting in Sh97.27million in interest and legal fees.
The Ministry had acknowledged owing Sh235.6 million, but its failure to settle the debt led to a court award of Sh327.19million.
“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,” Siyad added.
