The World Bank has asked the government to introduce punishments for cabinet secretaries, governors and chief executives of parastatals that continue to pay scrapped perks as part of conditions for a Sh157.8 billion ($1.2 billion) loan to Kenya.
The Washington-based lender also asked the country to lift the ban on hiring refugees, in what could heighten competition for the strained job opportunities while unlocking the potential of the migrants.
The two conditions form the core of terms to be fulfilled before any further disbursements from the World Bank’s development policy operations.
Sanctioning of State corporations, ministries and counties over the irregular payment of allowances is expected to set down the country’s wage bill to the desired level of no more than 35 percent of tax revenues.
“The public sector wage bill, including allowances, is subject to complex rules and regulations at the central government levels, many of which are not enforced, leading to repeated breach of payroll ceiling,” the World Bank observed without disclosing further details on the sanctions.
The government through the Salaries and Remuneration Commission (SRC) has recently cracked down on allowances, scrapping monies paid for sitting in internal committees and taskforces.
Despite declining in recent years, the wage bill is still estimated to be 40.45 percent of revenues in the financial year ending on June 30, 5.45 percentage points above the target.
Other terms to ring-fence public finance management include the adoption and utilisation of the Treasury Single Account (TSA), the creation of a payroll management policy for the public sector, the issuance of unified payroll numbers to all public officers and the elimination of manual payrolls.
Meanwhile, the multilateral lender estimates that refugees in the country now make up about one percent of the entire population warranting higher participation in the economy.
“Refugees account for almost one percent of Kenya’s population but their potential contributions to the economy- from skills to higher labour market contestation- remain underutilised.”
As part of the conditions that allowed the Sh157.8 billion disbursements, the World Bank noted that the Interior Ministry had issued the 2024 refugees general regulations providing for the treatment and welfare of refugees and the procedures of application for refugee status.
Additionally, the ministry has issued a legal notice specifying refugee identification documents to access services provided by the government.
By next year, when Kenya will be due for a second of three disbursements under the World Bank’s development policy financing/operations, the Interior Ministry is expected to simplify procedures for the issuing of class M work permits, which allow refugees to take up employment.
The ICT Ministry is expected to include refugee identification documents as part of the requirements needed for SIM card registration, allowing the immigrants to transact on mobile money services like M-Pesa and make calls.
Further conditions to the financing broadly cover the strengthening of climate action, including the promotion of urban public transport and e-mobility such as the adoption of policies to support the switch.
The new Sh157.8 billion ($1.2 billion) financing comprises a Sh111.7 billion ($850 million) loan, a proposed credit facility of Sh39.4 billion ($300 million) and a grant of Sh6.5 billion ($50 million), executed at an exchange rate of Sh131.5.
The new disbursement is expected to ease the current funding constraints on the government while laying the foundation for green investments and inclusive growth over the medium term.
“The programme is tailored to Kenya’s challenging macroeconomic context, framed by tight global and domestic credit conditions, fiscal pressures, shocks from climate change, and persistent poverty and inequality,” the World Bank added.
The multi-year programme is expected to support the government in lowering its twin deficits- fiscal and current account deficits- strengthen fiscal and external debt sustainability and seize opportunities for fiscal consolidation by raising the efficiency and transparency of the budget.
The funding will immediately unlock resources to oversee the implementation of the 2023/24 budget to June.
The financing will be complemented by fresh disbursements from the International Monetary Fund (IMF), which is set to imminently reach a staff level agreement on the seventh review of its multi-year programme with Kenya under the extended credit and fund facilities (EFF/ECF) and the second review of the resilience and sustainability fund (RSF).
Funding from the two Bretton Woods institutions is set to provide pivotal foreign exchange inflows while cutting on the need for commercial external loans such as Eurobonds.
