Cut spending, IMF team tells Kenya after salary increases

What you need to know:

  • An International Monetary Fund (IMF) mission has asked the government to stick to the fiscal discipline in the face of spending pressure and revenue shortfall
  • According to the IMF projections, the net public debt in relation to the GDP will decline from 44.6 per cent this year to 43.8 per cent next year
  • The mission has been in the country for one week in which it met Finance minister Njeru Githae, Central Bank governor Njuguna Ndung’u, other senior government officials, representatives of the private sector, the civil society and other development partners

Kenya should cut non priority spending as opposed to borrowing to finance the growing wage bill in the public sector following the recent pay rises or risk reversing the gains made in reducing the public debt.

An International Monetary Fund (IMF) mission has asked the government to stick to the fiscal discipline in the face of spending pressure and revenue shortfall. The government this week bowed to pressure from the education sector to award a pay increase amounting to over 21billion.

“To deal with the wage increases, Kenya should cut non priority spending in both the capital and recurrent expenditure and increase spending efficiency. This should be done within the available budget resource envelope,” Mr Dominico Fanizza, the head of the IMF delegation said on Tuesday.

Mr Fanizza was speaking after the completion of the fourth review of the Extended Credit Facility (ECF).

Projections

According to the IMF projections, the net public debt in relation to the GDP will decline from 44.6 per cent this year to 43.8 per cent next year.

The mission has been in the country for one week in which it met Finance minister Njeru Githae, Central Bank governor Njuguna Ndung’u, other senior government officials, representatives of the private sector, the civil society and other development partners.

It hopes to table the review to its executive board for approval, after which the fourth tranche of the loan for an amount of Sh9.3billion ($110 million) will be disbursed. This will bring the total disbursement so far to Sh45billion ($535million).

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