Treasury CS John Mbadi/DPCS SCREENGRABThe National Treasury has extended a freeze on new employment across all state corporations, maintaining stringent controls on staff recruitment.
The ministry says the move is in line with the government’s commitment to fiscal consolidation and rationalisation of the country’s public wage bill.
In a circular setting the stage for 2026-27 spending, Treasury CS John Mbadi has set stringent approval processes for state corporations, including public universities.
The agencies that seek to hire staffers for any reason must seek and obtain dual approval from their respective line ministries and the National Treasury.
The approvals, according to the directive to principal secretaries and state corporations CEOs, must be obtained before initiating any recruitment.
The directive, which affects hundreds of parastatals and their subsidiaries, effectively sustains a jobs freeze that has been in place since February 2022.
The government at that time issued strict guidelines on staffing levels to contain the costs of running the entities.
“Under this provision and to ensure justifiable and sustainable hiring process, state corporations, including public universities, are obligated to seek and obtain approvals from the respective line ministry and the concurrence of the National Treasury prior to initiating recruitment of new staff or replacements,” the circular states.
This means even replacing staff who have exited through natural attrition, that is, retirement, resignation, or death, will require fresh authorisation.
The measure is aimed at enforcing ‘staffing ceilings’ and rationalisation of staffing across state corporations.
The sustained freeze is set to prolong job market pressures, particularly for graduates and professionals seeking opportunities in state-owned enterprises.
The entities, currently 280 in number, have traditionally been significant employers, taking thousands on board.
The jobs freeze policy has been argued as having effectively locked thousands of qualified young Kenyans out of formal employment in the public sector.
Treasury, in the circular, has also warned against haphazard salary adjustments and other remunerative benefits for existing staff.
“They [adjustments] should only be done after receiving approval from the Salaries and Remuneration Commission (SRC),” it says.
Furthermore, corporations must first obtain written confirmation from the Treasury on the availability of funds before even approaching the SRC.
The hiring freeze is part of a wider austerity call outlined in the circular, which instructs parastatals to “rationalise personnel, operational and administrative costs”.
Mbadi has further directed the entities’ bosses to prioritise only expenditures that support their core mandates.
“Unnecessary spending on travel, training, seminars, consultancies, legal expenses, overtime and all non-core activities must be scaled down to the bare minimum,” the circular adds.
The directive has reinforced the government’s push to minimise dependence on the exchequer.
Treasury maintains the measure is essential to curb the ballooning public wage bill and align parastatal spending with national fiscal goals.
“The objective is to ensure wage bill control and sustainability of personnel costs in state corporations,” the circular states.
Parastatals seeking to recruit must now navigate a two-tier approval process, with the Treasury given final concurrence.
The circular makes it clear that any deviation from this process will be deemed irregular, with culpable CEOs facing surcharges.
Treasury says parastatal CEOs are expected to comply fully with the circular’s directives or risk having their annual budgets rejected.
CEOs who sanction spending outside approved budgets are staring at personal financial liability, punitive administrative action, and outright budget rejection.
“Chief executives officers of state corporations are reminded that incurring expenditures that are not approved in line with the State Corporations Act, Cap 446, Sections 11 and 12 are irregular, and they will be held personally liable for such expenditures in accordance with the applicable laws,” the memo reads.
Treasury has further warned that it would reject budget proposals by entities with no clear plan for settling pending bills, expressing concern over an upsurge in the outstanding contractual obligations.
“The National Treasury will not grant or recommend approval of annual budgets for state corporations without a clear action plan on the settlement of pending bills.”
Agencies have also been warned against initiating the implementation of new projects prior to settling pending bills.
The Treasury further raised concern that some regulatory authorities are creatively deducting capital expenditure from surpluses to reduce remittance to the exchequer.
It has also warned state corporations that deduct statutory contributions from employees but fail to remit the same.
“This constitutes a breach of statutory obligation, exposes institutions to significant legal and governance risks, and unfairly infringes upon employees’ rights.”
All budgets will be approved through the Government Investments Management Information System (GIMIS). “NO hard copies will be accepted.”
“Please note that GIMIS has been configured to block the capturing and submission of the FY 2026-27 budget for state corporations that have not captured and submitted all the required information/data.”
INSTANT ANALYSIS
State corporations with incomplete records on pending bills, pension liabilities or bank balances will be physically locked out of the budget submission process. The circular, copied to the auditor general, the Controller of Budget, and the Inspector General of State Corporations, emphasises fiscal discipline, reduction of pending bills, and strict compliance with existing laws.
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