Corporate NewsTreasury to Bailout Kenya Power and KQ in 2022

The National Treasury has approved to inject cash into Kenya Power and Kenya Airways in the financial year starting July 2022.

The state attributed the bailout to supporting the economic recovery of the two firms from the effects of  COVID-19 on the performance of the companies.

In the last financial year ended June 2021, Treasury departed from its earlier International Monetary Fund (IMF)-a backed stance which favoured long-term reforms to solve cash flow challenges facing state-controlled firms and parastatals instead of bailouts. This is after it pumped an additional Kes 10 billion into Kenya Airways.

The national carrier has made clear its plea for additional cash from anchor shareholder, the government, to help it out of its precarious financial position.

“We are in a negative equity position, which means we are insolvent as an organisation, obviously made worse by the pandemic,” KQ chief executive Allan Kilavuka said on August 26.

Consequently, Kenya power, reported a slump in profits by 80.1 per cent to Kes.138 million during the period ended 31st December 2020 as compared to Kes .692 million posted in 2019.

However, despite the pleas, no bailout was allocated to the two firms in the current financial year, raising concerns over their worsening cash flow positions could hurt operations and slow down recovery in economic activity.

Stakeholders, in recommendations in the Budget Review and Outlook Paper (BROP), last month faulted the government for not outlining a recovery plan for the troubled firms, arguing that Kenya Power and Kenya Airways (KQ) were key in “fuelling economic growth and the creation of employment” and should be supported through cash injection in the budget.

“This is duly noted and will be done during sector allocations,” the Treasury wrote in the final BROP report which factored public input.

On Wednesday, the stakeholder opened a three-day public hearing forum which will inform sectoral budget proposals to be considered in the Appropriation of the Budget Bill for the next financial year.

The bill should be ready for parliamentary approval by March 31—a month earlier than the legal timeline— due to elections slated for August next year.

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