Kenya to end US$300 million bailouto Kenya Airways in 2023
Nairobi, Kenya (PANA) - Kenya will end the US$300 million annual bailout of its national airline, Kenya Airways (KQ) in favour of a new business strategy, the national Treasury has disclosed in the national draft budget strategy paper.
"The Kenya Airways had demonstrated that Kenya could become a global aviation hub," the Cabinet Secretary, National Treasury, Njuguna Ndung'u said while unveiling the draft budget policy statement.
"Aviation is a strategic industry for the economy. It is vital for the tourism industry, exports of fresh produce and maintenance of Kenya’s position as a regional hub," the Cabinet Secretary said.
To support the aviation industry, the government will develop a turnaround strategy for Kenya Airways. A critical plank of this strategy will be a financing plan that does not depend on operational support from the exchequer beyond December 2023, the Cabinet Secretary said.
The 2023 Budget Policy Statement (BPS), the first to be prepared under the new Administration - the Kenya Kwanza Government, sets out the Administration’s priority programmes, policies and reforms to be implemented in the Medium-Term Expenditure Framework (MTEF).
The 2023 budget policy statement comes at a time when the government is finalizing the preparation of the Fourth Medium-Term Plan (2023-2027) of the Kenya Vision 2030 that will prioritize implementation of economic recovery strategies of the new administration to re-position the economy on a steady and sustainable growth trajectory.
The paper is framed against a backdrop of global economic slowdown underpinned by the ongoing Russia-Ukraine conflict, elevated global inflation, and the lingering effects of the COVID-19 pandemic and climate change related supply chain disruptions.
As the effects of COVID-19 pandemic started to fade away, the Kenyan economy bounced back recording a GDP growth rate of 7.5 per cent in 2021.
However, the momentum has been disrupted again by the Russia-Ukraine conflict that has disrupted global trade with increased fuel, fertilizer and food prices.
For the first time in five years the inflation rate in Kenya is above the government target range mainly driven by supply side constraints occasioned by external shocks and climate related food and energy prices.
Aside these challenges, the Kenyan economy continues to be confronted by various constraints such as recurrent drought affecting agricultural productivity; declining manufacturing productivity and skewed access to finance for business and development.
Other challenges are rigidities in business regulatory framework; weak governance; and fiscal risks including pension’s liabilities, stalled public projects, payment arrears; and high debt service that has hindered the economy from achieving its full potential.
The need to address these constraints and bolster resilience forms the basis of the Kenya Kwanza Government’s Economic Recovery Agenda anchored on a Bottom-Up Approach.
The agenda is geared towards economic turnaround and inclusive growth, and aims to increase investments in at least five sectors envisaged to have the largest impact and linkages to the economy as well as on household welfare.
These include Agriculture; Micro, Small and Medium Enterprise (MSME); Housing and Settlement; Healthcare; Digital Superhighway and Creative Industry.
Special focus will be placed on increased employment, more equitable distribution of income, social security while also expanding the tax revenue base, and increased foreign exchange earnings.
The implementation of these interventions is expected to stimulate economic recovery to 6.1 per cent growth in 2023 from the estimated 5.5 per cent in 2022.
The fiscal policy stance over the medium term aims at supporting the economic recovery agenda of the government through a growth friendly fiscal consolidation plan designed to slowing the annual growth in public debt and implementing an effective liability management strategy without compromising service delivery to citizens.
This is expected to boost the country’s debt sustainability position and ensure that Kenya’s development agenda honours the principle of intergenerational equity.
It outlines the strategic priorities of the new Administration, highlights the current state of the economy, provides macro-fiscal outlook over the medium term together with a summary of government spending plans as a basis for the FY 2023/24 budget.
The publication of the 2023 BPS aims to improve the public’s understanding of Kenya’s public finance management and guide debate on economic and development matters.
-0- PANA AO/RA 20Jan2023
