Job loss fears as Mbadi orders cost-cutting in State agencies

Job loss fears across various state corporations in Kenya are mounting following a new directive from the National Treasury aimed at rationalizing costs and reducing reliance on government funding. 

The order, issued by Treasury Cabinet Secretary John Mbadi, mandates that all state corporations streamline their personnel and operational expenses while leveraging technology to improve service delivery.

The directive comes as part of a broader effort by the Kenya Kwanza administration to minimise dependence on the National Exchequer, which has been under strain amid rising costs and fiscal pressures. 

“State Corporations will be required to develop and implement measures that will enhance diversification and increase internally generated revenues.

Further, state corporations should rationalize personnel, operational and administrative costs and leverage on ICT in delivery of services among other measures with a view to minimizing dependence on the National Exchequer funding,” said Mbadi.

 “The base for 2025/2026 FY expenditure estimates should be the approved
rationalized budget for 2024/2025 FY with minimal projected increase to cater for cost-of-living adjustment. Consequently, expenditures not supportive of the core mandate of the corporation like travelling, training, seminars, consultancies, legal expenses, overtime, and all non-core activities should be scaled down to the bare minimum,” Mbadi added emphasizing the need for a more sustainable financial approach.

The new directive has raised concerns among State employees and public sector workers labour unions, who fear that the push for austerity could result in widespread layoffs.  

Reacting to the circular,  public servants labour unions cautioned over any attempts by the Government to “reintroduce staff retrenchment through back door.”

“We just hope that the guidelines and instructions contained in that circular does not lead to massive job loss or an attempt to bring back retrenchment through the back door,” said Union of Kenya Civil Servants (UKCS) deputy national organising secretary Wilson Asingo.

As part of the reforms, the expenditure estimates for the fiscal year 2025/2026 will be based on the approved rationalized budget for 2024/2025, with only minimal increases proposed to accommodate cost-of-living adjustments. 

This move signals a tightening of budgets across public institutions, leading to the potential scaling back of non-essential expenditures such as travel, training, seminars, consultancies, legal expenses, and overtime.

Analysts warn that these measures could have significant implications for employment within state corporations, many of which are already facing challenges in a tough economic environment. 

“The emphasis on cost-cutting and efficiency could very well translate into job losses, as organizations look to align their workforce with reduced budgets,” said economic analyst Ian Nyoro.