The World Bank has asked the government to impose sanctions on Cabinet ministers, governors and CEOs of parastatals that continue to pay canceled concessions as part of conditions for a 157.8 billion shillings ($1.2 billion) loan to Kenya.
The Washington-based bank also asked the country to lift its ban on hiring refugees, which could further tense competition for job opportunities while unleashing the potential of migrants.
The two conditions constitute the core of the conditions that must be met before any further disbursement from the World Bank's development policy operations.
It is expected that imposing sanctions on state companies, ministries and provinces due to irregular payment of allowances will reduce 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 central government levels, many of which are not enforced, leading to frequent violations of the salary cap,” the World Bank noted, without revealing further details about the sanctions. .
The government through the Salaries and Remuneration Commission (SRC) has recently cracked down on allowances, canceling money paid for sitting on internal committees and task forces.
Despite a decline in recent years, the wage bill was still estimated at 40.45 percent of revenue in the financial year ending June 30, 5.45 percentage points above the target.
Other conditions for encapsulating public finance management include the adoption and use of the Treasury Single Account (TSA), the establishment of a policy for public sector payroll management, the issuance of uniform payroll numbers for all public employees, and the abolition of manual entries. Payroll.
Meanwhile, the multilateral lender estimates that refugees in the country now make up about one percent of the total population, necessitating greater participation in the economy.
“Refugees represent nearly one percent of Kenya’s population, but their potential contributions to the economy – from skills to labor market competition – remain underutilized.”
As part of the conditions that allowed for the disbursement of Sh157.8 billion, the World Bank noted that the Ministry of Interior issued the General Refugee Regulations 2024 which stipulates the treatment and welfare of refugees and procedures for applying for refugee status.
In addition, the Ministry issued a legal notice specifying the identity documents for refugees to access government-provided services.
By next year, when Kenya is scheduled to receive the second of three tranches under the World Bank's Development Policy Finance/Operations framework, the Ministry of Interior is expected to streamline procedures for issuing Category M work permits, which allow refugees to obtain… On job opportunities.
The Ministry of ICT is expected to include refugee identity documents as part of the requirements for SIM card registration, allowing migrants to transact on mobile money services such as M-Pesa and make calls.
Additional financing conditions cover broadly the promotion of climate action, including promoting urban public transport and e-mobility such as adopting policies to support the transition.
The new financing of Sh157.8 billion ($1.2 billion) includes a loan of Sh111.7 billion ($850 million), a proposed credit facility of Sh39.4 billion ($300 million) and a grant of Sh6.5 billion ($50 million), which has been implemented. At an exchange rate of 131.5 shillings.
This new disbursement is expected to ease the government's current financing constraints while laying the foundation for green investments and inclusive growth in the medium term.
“The program is designed to fit Kenya’s challenging macroeconomic context, defined by tight global and domestic credit conditions, financial pressures, shocks from climate change, and persistent poverty and inequality,” the World Bank added.
The multi-year program is expected to support the government in reducing its dual deficit – the public finance deficit and the current account deficit – and enhancing the ability to bear financial and external debts and seizing opportunities to control financial conditions by increasing the efficiency and transparency of the budget.
The funding will immediately unlock resources to oversee the implementation of the 2023/24 budget until June.
The financing will be supplemented by new disbursements from the International Monetary Fund (IMF), which is soon scheduled to reach staff-level agreement on the seventh review of its multi-year program with Kenya under the Extended Credit and Fund Facility (EFF/ECF) and the second review of the Resilience and Sustainability Fund ( RSF).
Financing from the Bretton Woods institutions is intended to provide pivotal foreign exchange inflows while reducing the need for external commercial loans such as Eurobonds.
