Kenya May Lay Off Thousands of Civil Servants Due to IMF Loan Deal

Tricky Condition for IMF $2.244 billion Loan

Thousands of government workers in Kenya are on the brink of losing their jobs in a civil service restructuring involving mergers and dissolution of hundreds of state-run corporations. The exercise is scheduled to begin after Christmas.

The move by the Uhuru Kenyatta administration is reportedly part of the conditions given before it can access $2.244 billion in loans for budgetary support from the International Monetary Fund (IMF). 

The agreement is reminiscent of the Structural Adjustment Programmes (SAP) of the 1990s. Kenya is also supposed to mobilise more taxes as part of the condition with the IMF.

The World Bank has also advised the government to “cut wasteful spending and increase its efficiency” adding that one of the ways to achieve this is by “leveraging digitalisation to cut operational costs.”

Also Read: Nigeria Close to Securing $1.5bn World Bank Loan – Finance Minister

Kenya’s Treasury Cabinet Secretary Ukur Yatani said this week the government had reached the “tough conclusion” that many state enterprises needed to be restructured “because, at the moment, some of them are actually a burden on the Exchequer.”

The funding from the IMF is crucial to the government, which is short of options in the debt market to finance its expansive spending plans and stimulate the economy in the wake of the Covid-19 pandemic that has hit revenues hard. The Kenya Revenue Authority (KRA) missed tax collection targets by over $600 million in the first four months of the current financial year.

State corporations have also seen huge declines in revenues. More than half of the country’s 247 parastatals registered either a deficit or a loss in the last financial year ended June, a Treasury report shows.

Also Read: Egypt Reforms Paying Off as Cairo Moves Closer to Another $1.6bn IMF Loan While Nigeria’s World Bank Loan Stalls

According to Yatani, there are parastatals that continue to incur huge administrative costs, such as paying leases and employees, despite serving about 10 people a month. “To avoid this … some of the State corporations will be merged, some will be dissolved and some will partner.” 

The plan is to restructure most of the 127 loss-making corporations with thousands of civil servants most likely to be dismissed in the process. Yatani declined to comment on whether the restructuring would result in job losses. Kenya had 69,445 civil servants as of the end of 2016.

Michael Ajifowoke

Michael is a budding media professional with more than two years of experience covering business, economy & tech. He spends his leisure reading about economics, finance, and international development.

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