Treasury Cabinet secretary Henry Rotich (left) with Central Bank of Kenya governor Patrick Njoroge. PHOTO | FILE
By GEOFFREY IRUNGU, girungu@ke.nationmedia.com
In Summary
The National Treasury will freeze increases in
allowances paid to civil servants even as it drops intention to sack
thousands of them as earlier planned.
The allowances will eventually be made part of the basic
pay, according to a joint memorandum sent by Treasury secretary Henry
Rotich and the Central Bank of Kenya (CBK) governor Patrick Njoroge to
the International Monetary Fund (IMF).
The freeze will mainly affect those who are in the
high job grades. The allowances include medical, commuter, entertainment
and housing have tended to be paid on the basis of position a civil
servant holds.
“We intend to tighten eligibility for allowances
(especially those at the high end of the job scale), freeze them in
nominal terms pending their review, and eventually include them as part
of the base pay,” said Mr Rotich and Dr Njoroge.
At the same time, the Treasury has dropped the
promise to cut down on the number of civil servants to hew the wage bill
as earlier agreed in the IMF programme that ended early this month.
The two wrote to the IMF as they sought the Bretton
Woods institution’s commitment for the precautionary financing
amounting to Sh153 billion ($1.5 billion). The facility is an insurance
policy from which Kenya can draw in the event of an external shock that
hits the local currency.
The freeze in allowances is expected to reduce the
wage bill in the long term while the inclusion in the basic pay should
also means that the government cannot just introduce new allowances in
an arbitrary fashion as has been the case in the past.
The Treasury is under pressure to cut spending in
order to also progressively reduce public debt as a percentage of the
gross domestic product (GDP).
According to the agreement with the IMF, the
Treasury intends to slash the budget deficit to 6.5 per cent from nearly
10 per cent last year and eight per cent this year.
“We are committed to gradually adjusting fiscal policy, through a combination of lower spending and higher revenues.
“We target a reduction in the fiscal deficit to 6.5
per cent of GDP in 2016/17 and five per cent in 2017/18, from our
unchanged deficit target of eight per cent of GDP in 2015/16,” said the
Treasury.
Public debt is also to be pushed down gradually from the current 52 per cent in line with the fall in the fiscal deficit.
“Our fiscal anchor is to reduce the present value
of gross public debt to 45 per cent of GDP in the medium term.
Consistent with this objective,” said the Treasury and the CBK.
The Treasury also noted that as part of the fiscal
consolidation, it had reduced overall spending by Sh84 billion as
indicated in the Budget Policy Statement 2016/17.
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