Kenya has frozen salary increments for all civil servants for two years starting from July, dampening their prospects of better fortunes amid tough economic times due to the Covid-19 pandemic.
The suspension announced by the Salaries and Remuneration Commission (SRC) affects basic salary, allowances and benefits paid in the public service sector.
The freeze affects all government workers.
Treasury has been struggling to raise revenues to run the bloated public wage bill that consumes more than half of taxes, impeding spending on development projects.
SRC decided to suspend the implementation of the third pay review cycle on advice by the Treasury.
“The National Treasury advised the commission that due to the effects of Covid-19 on the performance of revenue and the expected slow economic recovery, it should consider postponing the review for the next two fiscal years until the economy improves...The National Treasury will review the performance of the economy and advise SRC as and when the review can be done based on the prevailing circumstances to ensure affordability and fiscal sustainability,” said SRC chairperson Lyn Mengich on Thursday.
The commission said the pay increment would have cost the government Sh82 billion.
“The current public sector wage bill consumes a larger percentage of revenue than the target set in Public Finance Management Act, 2012 and a larger percentage of GDP compared to average for developing countries,” she added.
The public wage bill is 17 percent above the global average of 35 percent for middle-income countries and has been a point of concern for President Uhuru Kenyatta's administration.
The current wage bill stands at more than Sh800 billion, having risen from Sh458 billion in 2013.
The freeze on pay increment comes at a time allowances for new employees joining the civil service from July has been capped at no more than 40 percent of the monthly gross pay.
The cut in perks is one of the strategies, alongside a freeze in new hiring and removal of ghost workers, aimed at reducing Kenya’s ballooning public sector wage bill.
The new measures also come at a time governors had threatened to shut down the devolved units following a cash crisis that has made it difficult for counties to respond to the Covid-19 pandemic, settle pending bills and pay salaries.
They demanded that Treasury releases Sh102.6 billion due to counties in the current financial year.
“By end of next week, we will be making disbursements up to Sh40 billion, which include balances in March and the full amounts in April,” Treasury Secretary Ukur Yatani told Senators on Tuesday.
He said the disbursements will depend on the revenue.
“There is a challenge of revenue performance as a result of slowed economic activities and this is not unique only to counties. We have challenges...we are really falling behind,” he said.
The law stipulates that Treasury releases resources to county governments every 15th day of every month in a financial year.
This requirement has, however, been breached with governors blaming the delayed disbursements for their woes, including industrial action and stalled projects.
Data from the Council of Governors shows counties are yet to receive Sh102.6 billion that the Exchequer owes them two weeks to the close of the current financial year.
- Additional reporting by Lynet Igadwah.