Treasury writes off KQ's Sh24.2bn loan to keep it afloat

The government has written off a Sh24.2 billion loan advanced to struggling Kenya Airways in the latest move to keep the national flag carrier in the skies.

In budget documents presented in Parliament this week, the Treasury revealed that the loan was part of Sh27.2 billion worth of dormant loans that the Cabinet authorised to be written off.

Kenya Airways, which made another loss of Sh7.5 billion last year, had not made any attempt to repay the loan and it remained outstanding as at June 30, 2018. This made it the biggest recipient of write offs.

The government, which is the biggest shareholder in the airline, has been pumping money into KQ in an attempt to resuscitate it and pull it out of the red. But the airline has remained in the loss making territory for the last five years.

The write off comes just days after it emerged that the Treasury had taken a new Sh20 billion loan to help Kenya Airways repay another loan it borrowed from African Export-Import Bank (Afrexim) two years ago.

DEFAULTERS

Also on the list of state corporations, government agencies and other organisations whose loans were pardoned by the government is the Coffee Board of Kenya, whose loan of Sh976 million was written off.

Others were the Pyrethrum Board of Kenya (Sh863 million), Kenya Industrial Estates (Sh758 million), Meru Central Farmers Co-operative Union Ltd (Sh188 million), Sugar Belt Co-operative Union (Sh22 million) and the Associated Sugar Factory Ramisi (Sh15.8 million).

Even as the government wrote off these debts, it is still staring at more defaults totalling to Sh116.8 billion lent to 29 other institutions which have stopped paying.

Water companies are the most notorious defaulters and they don’t even pretend to be repaying their loans.

Others on the list include sugar companies and a host of struggling parastatals that are living off the mercy of taxpayers.

MANAGEMENT

Those listed in the non-performing loans portfolio include the Athi Water Services Board, which owes the government Sh39.1 billion for a loan it has stopped servicing.

The government gave the water board Sh39.5 billion, it only paid back Sh481 million before bailing out.

Lake Victoria South Water Services Board is another big defaulter. It has stopped servicing Sh13.1 billion it received from the government. Unlike Athi, the board has not made any attempt to pay the loan.

Other defaulters are Coast Water Services Board (Sh12.4 billion), Tanathi Water Services Board (Sh9.7 billion), Tana Water Services Board (Sh7.5 billion), Northern Water Services Board (Sh5.3 billion) and Rift Valley Water Services Board (Sh4.8 billion).

TAXPAYER

The National Water Conservation and Pipeline Corporation has failed to pay Sh2.4 billion, struggling Uchumi Supermarkets owes the taxpayer Sh500 million, while Agro-Chemical & Food Company Ltd has defaulted on a Sh1.1 billion loan.

Ironically, on the list of shame is Co-operative Bank of Kenya which owes the government Sh476 million despite being a top tier lender that makes billions of shillings in profit every year.

If these agencies do not pay, then the government may end up writing off their debts one more time at the expense of the taxpayer.

Despite the growing default rate, the government is not slowing down splashing money on the parastatals.