KQ bailout, fuel subsidy push mini budget to $944m

Saturday February 05 2022
Kenya Airways plane

Kenya has increased its budget estimates due to elections, Covid-19 expenditures and a bailout for the national carrier. PHOTO | FILE


Kenya Airways bailout, fuel subsidy and payments for Covid-19 vaccines topped the list of unforeseen expenditures that will see Kenyan taxpayers spend $944.1 million more in the budget for the financial year ending June.

Kenya’s supplementary budget estimates presented to Parliament on Tuesday indicate fresh allocations of $231.6 million to the national carrier and other undisclosed expenditures, $217.6 million to fuel subsidy, $79.1 million to prepare for the August General Election and $74.3 million to Covid-19 vaccines.

This has seen a 3.3 percent jump in the national budget from the original plan presented in April last year, widening the budget deficit.

“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 $1.1 billion,” Treasury Cabinet Secretary Ukur Yatani told Parliament.

He attributed the increase to expenses linked to the elections, Covid-19 expenditures, including $11.36 million for building a vaccines plant, and the bailouts.

This increased the budget deficit from the original projection of 7.5 percent of gross domestic product to 8.1 percent, signalling additional borrowing to plug the financing hole.


The Treasury had targeted to offer Kenya Airways $466.8 million in direct budget support in the year to June 2022 as well as the subsequent year, making it the largest corporate bailout.

The national carrier needs money for maintenance of grounded planes, payment of salaries and settlement of utility bills such as security, water, electricity and parking as well as to ease the effects of the virus that has obliterated global demand for travel.

Without State aid, the airline risks running out of money in the near future against the background of unease among banks about lending to African carriers.

The bailout comes as the State dropped the favoured long-term solution of nationalising the airline.

The nationalisation plan approved by lawmakers in July 2019 would have led to the delisting of the airline from the Nairobi Securities Exchange.

Oil subsidy cost

Payments to oil marketers to keep fuel prices unchanged in the monthly reviews have cost the Treasury $217.6 million more.

The subsidy was meant to cushion motorists from rising global fuel prices.

Oil dealers who sought anonymity for fear of State reprisal have been complaining that the government has not fully compensated the full costs incurred in the importation of fuel. The State tapped funds from the fuel subsidy scheme that is supported by the Petroleum Development Levy.

The Treasury sought fresh approval of $74.3 million 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 this year.

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.

The country last month invited firms through a global tender to bid for the construction of a Covid-19 vaccine plant.

The plan to manufacture jabs locally has prompted the budget to increase by Sh1.3 billion.

The Treasury has also allocated an additional $76.9 million for the electoral commission and $2.83 million more to the political parties registrar to meet the shortfall needed to conduct the August General Election.