Kenya: IMF Raises Red Flag On Kenya’s Rising Wage Bill

Nairobi – The International Monetary Fund has said it will hold discussions with Kenya during a quarterly review in April, about the country’s eligibility to take up a $1.5 billion contingency loan to address external shocks.

Kenya made a commitment to the Fund when negotiating the credit that it would control the fiscal deficit during the run up to the August 8 election.

The commitment has now been put into question after the Cabinet approved salary increases for civil servants last week that will cost Ks00 billion ($1 billion) from July.

“All these things that are happening in an election year and especially to an economy that is still vulnerable to shocks will be assessed in our next review in April. We are going to reassess the impact of new developments such as drought and increases of the wage bill in the budget,” Armando Morales, the IMF resident representative in Kenya, told The EastAfrican.

He, however, said the new spending would not be a deal-breaker as long as the government proves its commitment to reduce the fiscal deficit.

Last year, the IMF, through a report presented to the executive board on May 6, 2016, observed that Kenya is among countries that exhibit large increases in wage bill spending in the run-up to elections.

Source: Angola Press News Agency