Money Markets
By GEOFFREY IRUNGU, girungu@ke.nationmedia.com
In Summary
- Though the exact number of workers targeted for retirement remains unknown, Treasury documents promise affected workers compensation for the early exit, saying money has been set aside for the exercise.
- Newly released IMF documents show the institution also managed to get the government’s commitment to extend biometric registration of civil servants to the counties and parastatals as part of efforts to cut the public wage bill.
- Kenya’s total public wage bill – including ministries, departments, agencies, commissions, the disciplined forces and independent constitutional offices – is estimated at Sh568 billion or 11 per cent of GDP compared to the global best practice of seven per cent.
Thousands of civil servants will lose their jobs in
the next three months if the Jubilee government keeps a promise it made
to the International Monetary Fund (IMF) in July.
Though the exact number of workers targeted for retirement
remains unknown, Treasury documents promise affected workers
compensation for the early exit, saying money has been set aside for the
exercise.
Newly released IMF documents show that the
Washington-based institution also managed to get the government’s
commitment to extend biometric registration of civil servants to the
counties and parastatals as part of efforts to cut the public wage bill.
A similar exercise was conducted late last year for
national government employees resulting in the removal of more than
12,500 ghost workers from the payroll. The deal also includes a freeze
in public sector employment but excludes critical sectors.
“We will also extend to 2015/16 the freeze on new
recruitment – except for exceptional services such as security, health
and education – that was introduced in FY2014/15,” said Henry Rotich,
the Treasury secretary.
Mr Rotich says in his communication with the IMF
that “the next phase of the programme entails rationalisation and
redeployment in the period July-December 2015 to establish options and
incentives for voluntary separation, with a clearly specified budget for
accelerated benefits, early exit compensations, and other facilities.”
The minister wrote the letter to the IMF which was
countersigned by Central Bank of Kenya governor Patrick Njoroge. It is,
however, the IMF that has made public contents of the agreements with
the Kenyan authorities as part of its disclosure obligations.
Mr Rotich acknowledges in the letter dated August
31 that Kenya faced both external and domestic shocks as seen in the
depreciation of the shilling and rising interest rates. More recently,
the CBK has raise lending rates to cushion the local currency from rapid
depreciation reducing foreign exchange reserves by more than Sh100
billion this year alone.
The employment freeze and biometric registration
were first made public last year but there has been no indication of
commitment to follow through.
Kenya’s total public wage bill – including
ministries, departments, agencies, commissions, the disciplined forces
and independent constitutional offices – is estimated at Sh568 billion
or 11 per cent of the gross domestic product (GDP) compared to the
global best practice of seven per cent.
At Sh568 billion, the public wage bill also stands
at more than 50 per cent of total revenues against globally recommended
threshold of not more than 35 per cent.
The wage bill for civil servants – excluding
teachers, and the disciplines forces – stood at 5.6 per cent of the GDP
at the end of June 2014 and the planned retrenchment is expected to
bring this down to 5.1 per cent in the fiscal year ending June.
Mr Rotich says the agreed actions “would allow us
to continue reducing wage spending to 5.1 per cent of GDP in 2015/16
compared to 5.6 per cent in 2013/14.” The wage bill has spiralled out of
control since the onset of devolution as some counties ignored the rule
that they only fill vacant positions.
Mr Kenyatta’s government has made initial steps in a
parastatals reform plan that has seen a few merged, but the staff in
the previously separate agencies continue to remain in employment.
The challenge of ghost workers is also plaguing
many counties. When the Nairobi government registered its workers afresh
last year, it found thousands of non-existent employees on its payroll.
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