The Public Accounts Committee (PAC) has raised the alarm over a controversial KSh10 billion unsecured loan disbursed to Kenya Airways (KQ), exposing glaring accountability gaps within the National Treasury.
During a heated session on Tuesday, November 18, the committee—chaired by Garissa Woman Representative Amina Udgoon Siyad—scrutinized the Treasury’s audit report for the financial year ending June 2024 and uncovered what MPs described as “deeply troubling” irregularities in the handling of public funds.
Billions Released to KQ Without Signed Agreements
According to the Auditor-General’s findings, the KSh10 billion allocated to Kenya Airways in 2022/2023 as an on-lent loan was released without any formal loan agreement, a revelation that stunned lawmakers.
“This Committee finds it unacceptable that billions were released without any signed agreements. How does the Treasury justify lending public money informally?” Siyad questioned.
The loan pushed KQ’s total government-backed exposure to KSh41.27 billion, disbursed between 2019 and 2022. With interest and penalties factored in, the airline’s debt had ballooned to KSh43.048 billion by December 2022.
Even more concerning, the government paid KSh12.326 billion on behalf of KQ to settle a defaulted foreign loan—including KSh7.8 billion spent through Article 223, which allows emergency expenditure without prior parliamentary approval.
“We did not see any documentation showing how Treasury intends to recover these amounts. No repayment plan, no security, no agreement,” a representative from the Auditor-General’s office told the committee.
The audit concluded that the recoverability of KSh55.37 billion owed by Kenya Airways remains uncertain, putting taxpayers at significant risk.
The PAC session also revisited the controversial acquisition of a 60% stake in Telkom Kenya for KSh6.196 billion, a deal executed under Article 223.
Funyula MP Wilberforce Oundo said the Treasury’s move amounted to a blatant breach of financial laws:
“You cannot spend over six billion shillings and then hope Parliament will rubber-stamp it afterwards.”
MPs noted that despite Treasury seeking retrospective approval, Parliament never ratified the transaction.
MPs further flagged a case where delayed payment of KSh235.6 million to a contractor resulted in a court judgment of KSh327.19 million, costing taxpayers an unnecessary KSh97.27 million in avoidable interest and legal fees.
“This is a classic case of negligence. Taxpayers should not bear the burden of such carelessness,” Siyad said, directing Treasury officials to table all supporting documents, including loan agreements and Article 223 justifications.
Separate Committee Raises Red Flag on Hustler Fund Losses
Meanwhile, concerns have mounted over possible losses in the Hustler Fund, after MPs revealed that only KSh1.4 billion has been repaid out of KSh14 billion disbursed from the Exchequer.
“We don’t know whether money is lost or stolen. We simply need proof that the money is safe,” a member of the Special Funds Accounts Committee stated.
Another MP warned the disparity between funds issued and recovered paints a troubling picture:
“The CEO confirmed KSh14 billion was released and only KSh1.4 billion recovered. Mathematically, over KSh12 billion is already at risk.”
With mounting concerns—from massive unsecured loans to irregular emergency expenditures and ballooning public liabilities—MPs insist the National Treasury must provide full documentation and a clear plan to safeguard taxpayer funds.
“If this paperwork does not exist,” Siyad warned, “then someone must take responsibility.”
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