National carrier Kenya Airways (KQ) and electricity distributor Kenya Power is set to receive a Ksh 37.3 billion bailout.
The government bailout will support restructuring at the two state agencies.
KQ will receive Ksh 34.95 billion and Kenya Power Ksh 2.35 billion in the financial year 2021/22 and 2022/23.
This funding is part of fiscal consolidation conditions set by the International Monetary Fund (IMF) which requires the government to accelerate reforms at parastatals and return them to profitability.
For this matter, the government will use at least Ksh 54.8 million to bailout State-owned enterprises (SOEs).
As of September, KQ had already received Ksh 10 billion bailout from the Treasury to help the State agency service its debts.
The good news, however, is that the bailout as it has reduced its operating losses in the first half of 2022 by 31.5 percent.
“Commercial performance paired with initiatives under the restructuring plan have already had a positive impact on KQ’s solvency issues,” said the Treasury.
KQ restructuring will include reducing its fleet size by terminating some aircraft leases and laying off staff to reduce staff costs.
“The government will continue to support KQ financially in the financial year 2022/23 to facilitate normalisation of overdue payments to prevent defaults for settlement of operating lessors’ arrears and completion of payments, as well as other working capital support,” said the Treasury.
On the other hand, Kenya Power will use the bailout to address the liquidity gap left by the reduction of electricity tariffs in January.