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Kenyan President Says Wage Cuts Will Free Money for Roads

March 10 (Bloomberg) -- Kenyan President Uhuru Kenyatta said cuts to the government wage bill and other austerity measures will free up funds for projects that will spur economic growth such as building a railway and more roads.

Kenyatta announced on March 7 that he and Deputy President William Ruto will take a 20 percent salary reduction and that the wages of cabinet secretaries and principal secretaries will be cut by 10 percent. The heads of state-owned companies must accept a 20 percent salary decrease or risk losing their jobs, Kenyatta told a conference today in the capital, Nairobi.

“The slice of our national cake devoted to development expenditure would continue to dwindle if we do not contain the pressure of wages,” Kenyatta said. “It is time to put the monster to rest and we wish to lead by example.”

The government spends about 55 percent of annual tax revenue paying public workers, Kenyatta said. That amount is on track to increase to 64 percent of government income in two years if left unchecked, Ruto said at the same event.

The Kenyan poor would benefit more if the government improved its income-tax policies rather than implemented a “populist” pay cut, the opposition Orange Democratic Movement party said today in an e-mailed statement.

“These cuts will not in the least affect the standards of living,” the party said.

Pay Rise

Kenyan members of parliament in May voted to increase their pay to 851,000 shillings ($9,832) a month, higher than the 532,000 shillings set by the state-run Salaries and Remuneration Commission. The minimum wage for the lowest-paid Kenyan employee, including unskilled farm workers, is 4,854 shillings in a country where the World Bank estimates almost half of the 43 million people live in poverty.

Kenyatta has also ordered that government workers only travel abroad for “essential” business to help reduce expenses. The new cost-cutting measures should find savings of 20 billion shillings ($231 million) to 30 billion shillings this year, Planning Secretary Anne Waiguru said today.

Kenyatta announced a review of the public payroll in January after it was found that 1.8 billion shillings a year is lost annually to paying wages for people who aren’t employed by the government including dead and retired former workers.

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

To contact the editors responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net Sarah McGregor, Michael Gunn

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