Kenya's government will spend a total of $430 million to service Kenya Airways' loans it had guaranteed, as pressure mounts from the IMF to cease bailing out the airline.

The payments, to be spread over the next four years, are for loans the National Treasury guaranteed Kenya Airways after years of losses left the airline unable to service debt owed to international lenders, Business Daily reported citing parliamentary papers.

One of the lenders, US Exim Bank, issued the Treasury with a default notice for delayed payment of $407 million in December, piling pressure on the exchequer over the loan.

KQ originally had loans amounting to $842 million to Exim Bank, out of which $525 million had been guaranteed by the government.   

The National Treasury has set a 2027 deadline to clear the guaranteed airline's debt and the money spent will be reflected as shareholder loans to the struggling carrier.     

The National Assembly approved the Treasury’s take-over of the loan six years ago, as mounting losses made it difficult for Kenya Airways to service the debt.

The IMF - a key financier of the Kenyan Government - said last Thursday the National Treasury should speed up options already being considered to end the streak of losses at Kenya Airways and help the carrier stop reliance on taxpayers for bailouts.

It approved almost $1 billion for Kenya last week, saying the East African country had met conditions for continued financing under programs to help reform the economy.   

The fund has included the reforms at the airline as part of the conditions for an extended credit facility to the Exchequer.

“It is the stated objective of the government that KQ should be weaned off budgetary support by December 2023,” the IMF has said.

The government, which holds a 48.9% stake in the airline, has previously said it is keen to partner with a strategic investor to help the airline back to profitability.

The airline has said it aims to identify a financial adviser by December, to help develop an investor memo that will guide the selection of the preferred investor.    

(Editing by Brinda Darasha; brinda.darasha@lseg.com)