Thousands of civil servants are starring at job loses as the government plans to dissolve or incorporate hundreds of parastatals in a new loan seeking deal. The plan is set to kick off immediately after Christmas, December 25, 2020.
On Tuesday, December 1, Treasury CS Ukur Yatani stated that the Kenya Revenue Authority had missed its target by close to Ksh 70 billion adding that there was pressure by lenders to have Kenya cut spending.
Restructuring of state corporations was one of the key conditions for Kenya to secure a loan from the International Monetary Fund (IMF) and the World Bank.
Yatani admitted that the revenue of most state entities has plummeted recording deficits and losses in the 2019/2020 financial year.
127 out of the 247 parastatals have been earmarked for restructuring with Yatani lamenting that some parastatals serve only 10 people.
"At the moment some of them are just a burden. Some of the corporations have to be merged, some will be dissolved and some will partner.
"We are going to outline structural reforms which we will then undertake at all cost," Yatani stated while addressing MPs in Parliament.
The fate of over 70,000 civil servants lies in the restructuring as a number of them will either be sent home or transferred. Yatani declined to give a specific solution on how the government would handle the crisis.
A similar plan was adopted in the 1990s with civil servants sent home after the World Bank and IMF listed tough measures as a condition for granting Kenya loans.
The government is also under pressure to digitize its processes as a way of cutting costs. IMF confirmed that Kenya had opted to either agree on the conditional loan deal or extended credit as she seeks a Ksh 250 billion loan.
The Covid-19 pandemic, coupled with tax relief packages disrupted government plans as it fell short of revenue targets. The tax relief packages are set to be reversed in January 2021.
KRA warned Kenyans to prepare for tough times in January 2021 as it confirmed plans to introduce new tax brackets that aims to boost revenue collection.
The taxman already rolled out the Minimum Tax which will see businesses pay tax whether they make a profit or not.
