Kenya Airways Bailout and Fuel Subsidy Top Ksh 126 Billion Extra Budget

The National Treasury has revised the National budget upwards by Sh126.3 billion (3.3 percent) with Kenya Airways the petrol subsidy and payments for Covid-19 vaccines being the key drivers of the rise.

Kenya Airways was initially set to receive Sh53.4 billion with the funds set to be directed towards maintenance of grounded planes, payment of salaries, and settlement of utility bills. However, under the new budget the national carrier will receive the highest additional bailout funds of Sh 26 billion.

The budget estimates presented to the National Assembly on Wednesday revealed that an additional Sh 24.9 billion had been allotted to the fuel subsidy, Sh8.5 billion channeled to the  COVID-19 vaccines while the August General elections received Sh 9.1 billion boost.

“The overall change in the national government ministerial budget, excluding the consolidated fund services and county allocations, from the original approved budget is an increase of Sh126.3 billion,” Treasury CS Ukur Yattani told Parliament.

The increment widens the budget deficit to 8.2 percent from 7.5 percent, an indication that the government may have to borrow in order to sustain its activities.

The provision of the bailout to the national airline is an alternative to the initial plan to nationalize the airline which reported losses worth Sh36.2 billion in the 2020 financial year.

Without State aid, Kenya airways risked running out of money in the near future against the background of unease among banks about lending to African carriers. In the first half of 2021, the airline narrowed its pretax loss by 20 percent to Sh11.5 billion.

The bailout comes as the State dropped the favoured long-term solution for the ailing Kenya Airways that was anchored in nationalisation of the airline. The nationalisation plan approved by lawmakers in July 2019 would have led to the delisting of Kenya airways from the Nairobi Securities Exchange (NSE).

Payments to oil marketers to keep fuel prices unchanged in the monthly reviews have cost the Treasury Sh24.9 billion more. The subsidy Is meant to cushion motorists from rising global fuel prices on the back of a speedier than expected economic recovery as vaccines are rolled out.

under the Supplementary budget. the Treasury sought fresh approval of Sh8.5 billion for buying Covid-19 vaccines under a plan supported by the World Bank, which boosted Kenya’s target to inoculate 10 million people by December.

The World Bank financing helped Kenya buy vaccines through an African Union facility set up for that purpose, as well as through COVAX, the global scheme for sharing vaccines equitably.

The cash was also be used to boost Kenya’s cold chain facilities for storage of vaccines, training of health personnel and other associated activities.

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