Kenya Reallocates $1.3 Billion in Budget After Salary Increases

Kenya’s cabinet passed a 116 billion-shilling ($1.3 billion) supplementary budget that will re-allocate cash to pay for an increase in public-worker wages in the fiscal year through June, according to the Treasury.

The revisions will shift funds and keep total spending at the 1.6 trillion-shilling level set out in the budget passed by lawmakers this year, Treasury Secretary Henry Rotich said today by phone from the capital, Nairobi. The changes will be presented to parliament for approval, he said.

The East African government this year agreed to salary hikes for some state-paid employees including police officers and teachers, created a new tier of county-level governments after March elections and boosted the minimum wage by 14 percent in May. Pay demands are adding pressure to the country’s wage bill, which at about half of tax income is “very high,” the International Monetary Fund said in June.

Of the 2.1 million people with jobs in Kenya, about 681,100, or 32 percent, are employed by the state, according to the Nairobi-based Kenya National Bureau of Statistics.

The supplementary budget will also allocate more funding to operations, maintenance and projects with a view to financing “development expenditure to help attain and maintain a sustainable public debt level,” the presidency said in an e-mailed statement on Nov. 22, without elaborating.

To help cut costs, Kenya introduced a public-service hiring freeze while it reviews the pay scale and it plans to reduce the number of state corporations to free up as much as 118 billion shillings in expenditure, Rotich said.

“We are rationalizing the budget by reallocating funds, and using some austerity measures to ensure we pay for the additional expenditures without increasing the amount of money budgeted for this year,” Rotich said.

Kenya’s $38-billion economy is forecast by the government to grow 5.5 percent to 6 percent this year from 4.6 percent last year.

To contact the reporter on this story: David Malingha Doya in Nairobi at dmalingha@bloomberg.net

To contact the editor responsible for this story: Nasreen Seria at nseria@bloomberg.net

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