Government freezes jobs and cuts perks

On Monday, Education permanent secretary Karega Mutahi said the government was unable to disburse Sh10 billion for free primary and secondary education because there was no money. 

Mr Kinyua said the Treasury had received requests from within government for additional funds of more than Sh100 billion. “Treasury has reviewed all the requests and allowed limited additional funds to address strategic interventions related to food crisis and other emergencies,” he added.

The PS said there was a big financial gap occasioned by the approved additional expenditure and anticipated revenue shortfall. “In view of existing demands and the need to provide for interventions by the government, it has been decided that the financial year 2008/09 budget for the items… be reduced.”

Spending on development is on hold and projects that are not likely to start this financial year should be deferred to next fiscal year. In addition, all ongoing projects, Mr Kinyua directed, should be reviewed to reflect the disbursement trends and capacity to undertake them.

Savings made from the development kitty will be surrendered to the Treasury to be used in sectors that are most affected by the shortfall.

Mr Kinyua said requests for re-allocation of funds by departments that have made the savings will not be approved. “Accounting officers are required to implement these measures with effect from the date of this circular,” the PS added.

The government said it was experiencing a cash crunch because of the post-election violence, high oil prices and the world recession. It also revealed that the economy grew by a mere 2.5 per cent in the second quarter of the financial year — October, November and December.

The government had expected the economy to grow by 4.5 per cent, there would be sustained political and macro-economic stability, increased exports and improved domestic demand in addition to structural reforms. “Demand for our exports is likely to decline, while the high oil price has triggered high cost of inputs,” he added.

The circular is copied to the Head of Public Service and Secretary to the Cabinet Francis Muthaura, the Controller and Auditor-General Anthony Gatumbu and all accounting officers.

This comes just a day after the International Monetary Fund said it could not approve a loan of $100 million (about Sh8 billion) to Kenya. The country needs to fund importation of maize and restock foreign reserves at the Central Bank of Kenya. IMF said Kenya’s request would only be placed before the board late in April or early May.

Kenya had, in January, applied for the loan through the Rapid Access Component of the Exogenous Shocks Facility (ESF), an emergency line of credit open to IMF member states going through a significant negative impact on the economy. Prime Minister Odinga had asked for the loan at a meeting in Davos-Klosters, Switzerland.

Donors have also not responded to a government appeal for food, saying they are waiting for the number of people facing starvation to be independently determined. They will also give food through the World Food Programmes and other humanitarian organisations, but not through the government.

On Tuesday, Finance minister Uhuru Kenyatta told the Nation by phone that it was critical that farmers, especially in the Rift Valley, planted enough food this season. President Kibaki was in the Rift Valley on Wednesday to launch a food production campaign.