EXIM Bank (United States of America) has issued a demand notice to Kenya for overdue repayments of a USD831.2 million loan which the government guaranteed for Kenya Airways (KQ, Nairobi Jomo Kenyatta) in 2014 for the purchase of seven aircraft, the authority confirmed to ch-aviation.

"As part of a standard process, I can confirm the Export Import Bank of the US issued what is known as a Demand Notice to the Government of Kenya for an overdue payment. I want to clarify [that] this is not a default and the notice did not demand a full payment of the outstanding loan. EXIM is working closely with the Government of Kenya on the next steps to put Kenya on the best path forward for future payments. EXIM has a long history of working with the Kenyan government and Kenya Airways, " a senior EXIM official explained.

“For further background, this is regarding the 2014 EXIM authorisation of USD831.2 million in support of the purchase of seven aircraft (six B737-800 and one B777-300ER) by Kenya Airways,” he added.

This follows the disclosure recently by Kenya's Treasury Principal Secretary Chris Kiptoo who told parliamentary oversight committee on public debt and privatisation: "We have an outstanding balance of USD462 million. 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."

He said the Treasury had guaranteed the loan to the struggling airline at an exchange rate of KES84 to the US dollar. The exchange rate currently stands at KES125.2 to the US dollar.

As reported, the government-guaranteed loan was aimed at financing the purchase of seven aircraft and one engine. Bloomberg reported the government took over the repayment of the loan from Kenya Airways in October 2022 after the majority-state-owned carrier failed to meet its repayment obligations. Kenya Airways halted repayments as it ran into financial difficulties exacerbated by the Covid-19 pandemic.

Kenya's Nation Media Group reported the government's default highlighted the country’s struggles with mounting public debt, whose cost servicing was expected to be more than half of projected state revenues in the fiscal year ending June 2023.

The Treasury has already slashed its assistance to Kenya Airways by KES10 billion shillings (USD79.8 million) from KES30 billion (USD239.5 million) to KES20 billion (USD159.6 million) in its 2022/23 supplementary budget in line with its aim to lessen the airline's burden on the state.