Mwanafalsafa
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- Jun 24, 2007
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Hebu jifunzeni kutoka kwa jirani ili siku nyingine msiwe mnaongea kama wagonjwa wa dementia.
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US-backed financier has slapped the Treasury with a default notice for delayed payment of a Sh57.8 billion loan that the government guaranteed Kenya Airways.
Chris Kiptoo, the Treasury Principal Secretary, told Parliament that the Exim Bank of the USA has handed in a default notice after Kenya failed to remain up to date with payments of the loan.
This highlights the country’s struggles with the mounting public debt, whose cost servicing is expected to be more than half of projected State revenues in the fiscal year ending June.
KQ defaulted on part of its $525 million (Sh64.6 billion) loan from the Private Export Funding Corporation (PEFCO) of the USA and guaranteed by Exim Bank of USA which, in turn, was guaranteed by the Government of Kenya.
The 89-year-old Exim Bank, which is fully owned by the US government, provides direct loans, commercial loan guarantees, export credit insurance and working capital guarantees for American exporters.
Dr Kiptoo said the Treasury guaranteed the loan to the struggling airline at an exchange rate of Sh84 to a dollar. The exchange rate currently stands at Sh125.2 to the dollar.
“We have an outstanding balance of $462 million (Sh57.77 billion). A default notice has been issued by the guaranteed lender which is US Exim Bank which has called on the government of Kenya to pay. Now we don’t have, to say the truth, enough headroom to pay, but what is important is to pay,” Dr Kiptoo told the committee on Public Debt and Privatisation.
Technically a call-up of the loan means that the lender can demand full repayment of the debt on fears of a borrower’s future ability to make payments.
The KQ loan was a 12-year facility initially provided by Citi Bank and JP Morgan before PEFCO took it over as Exim and Kenya government joined in as guarantors.
The airline halted payments as it ran into financial difficulty exacerbated by the Covid-19 pandemic, which led to the grounding of a large part of global air travel.
The airline stopped remittances on the guaranteed and the non-guaranteed portions of the loan, the Treasury said in an earlier report.
“Following the default,” according to the report, the cabinet gave approvals to pay the loan arrears “and the loan balance to be novated—replace an old obligation with a new one-- to the government.”
The airline, which has been surviving on State bailouts since the Covid-19 pandemic, reported a Sh9.8 billion loss in August — a better performance than the Sh11.48 billion loss it recorded in the same period a year earlier.
Read: Taxpayers to take over Sh59.7 billion Kenya Airways loans
The government in December announced it will take over Kenya Airways loans amounting to $485 million (Sh59.7 billion) that it had guaranteed the carrier.
The Treasury officials told the International Monetary Fund (IMF) that government would undertake many such takeovers of distressed loans—technically known as novation—pushing up the country’s annual debt service by Sh10 billion.
Business Daily
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US-backed financier has slapped the Treasury with a default notice for delayed payment of a Sh57.8 billion loan that the government guaranteed Kenya Airways.
Chris Kiptoo, the Treasury Principal Secretary, told Parliament that the Exim Bank of the USA has handed in a default notice after Kenya failed to remain up to date with payments of the loan.
This highlights the country’s struggles with the mounting public debt, whose cost servicing is expected to be more than half of projected State revenues in the fiscal year ending June.
KQ defaulted on part of its $525 million (Sh64.6 billion) loan from the Private Export Funding Corporation (PEFCO) of the USA and guaranteed by Exim Bank of USA which, in turn, was guaranteed by the Government of Kenya.
The 89-year-old Exim Bank, which is fully owned by the US government, provides direct loans, commercial loan guarantees, export credit insurance and working capital guarantees for American exporters.
Dr Kiptoo said the Treasury guaranteed the loan to the struggling airline at an exchange rate of Sh84 to a dollar. The exchange rate currently stands at Sh125.2 to the dollar.
“We have an outstanding balance of $462 million (Sh57.77 billion). A default notice has been issued by the guaranteed lender which is US Exim Bank which has called on the government of Kenya to pay. Now we don’t have, to say the truth, enough headroom to pay, but what is important is to pay,” Dr Kiptoo told the committee on Public Debt and Privatisation.
Technically a call-up of the loan means that the lender can demand full repayment of the debt on fears of a borrower’s future ability to make payments.
The KQ loan was a 12-year facility initially provided by Citi Bank and JP Morgan before PEFCO took it over as Exim and Kenya government joined in as guarantors.
The airline halted payments as it ran into financial difficulty exacerbated by the Covid-19 pandemic, which led to the grounding of a large part of global air travel.
The airline stopped remittances on the guaranteed and the non-guaranteed portions of the loan, the Treasury said in an earlier report.
“Following the default,” according to the report, the cabinet gave approvals to pay the loan arrears “and the loan balance to be novated—replace an old obligation with a new one-- to the government.”
The airline, which has been surviving on State bailouts since the Covid-19 pandemic, reported a Sh9.8 billion loss in August — a better performance than the Sh11.48 billion loss it recorded in the same period a year earlier.
Read: Taxpayers to take over Sh59.7 billion Kenya Airways loans
The government in December announced it will take over Kenya Airways loans amounting to $485 million (Sh59.7 billion) that it had guaranteed the carrier.
The Treasury officials told the International Monetary Fund (IMF) that government would undertake many such takeovers of distressed loans—technically known as novation—pushing up the country’s annual debt service by Sh10 billion.
Business Daily
