The National Treasury has prolonged a long-standing freeze on recruitment across all state corporations, entrenching strict controls on hiring and staff-related expenditure as the government intensifies efforts to rein in the public wage bill.
In a circular outlining the budget framework for the 2026–27 financial year, Treasury Cabinet Secretary John Mbadi directed that no state corporation — including public universities — may recruit new staff or replace departing employees without securing approval from both the parent ministry and the National Treasury.
The directive effectively sustains a jobs freeze that has been in force since February 2022, when the government first imposed staffing controls to curb rising operational costs within parastatals.
Under the new instructions, approvals must be obtained before any recruitment process begins, even in cases of natural attrition such as retirement, resignation, or death. Treasury says the policy is aimed at enforcing staffing ceilings and ensuring sustainable personnel management across the public sector.
“This provision is intended to ensure a justifiable and sustainable hiring process,” the circular states, noting that any recruitment undertaken without the required approvals will be considered irregular.
Kenya currently has about 280 state corporations and subsidiaries, many of which have traditionally been major employers. The prolonged freeze is expected to deepen pressure in the job market, particularly for graduates and professionals who have historically relied on parastatals for formal employment opportunities.
Treasury has also tightened controls on staff remuneration, warning against salary reviews and the introduction of new benefits without prior approval from the Salaries and Remuneration Commission (SRC). Before approaching the SRC, corporations must first obtain written confirmation from the Treasury on the availability of funds.
Beyond staffing, the circular outlines a broader austerity drive, instructing state corporations to rationalise personnel, administrative, and operational costs. Spending on travel, training, seminars, consultancies, legal fees, overtime, and other non-core activities must be reduced to the bare minimum.
Mbadi further directed corporate chiefs to focus resources strictly on activities aligned with their core mandates, as the government pushes parastatals to reduce reliance on exchequer funding.
Treasury warned that chief executive officers who authorise spending outside approved budgets risk personal financial liability, administrative sanctions, and rejection of their entities’ budgets.
“Incurring expenditures not approved in line with the State Corporations Act is irregular, and responsible officers will be held personally liable,” the memo cautions.
In addition, Treasury said it will not approve budgets for state corporations that lack a clear plan for settling pending bills, citing growing concern over unpaid contractual obligations. Agencies have also been barred from initiating new projects before clearing existing liabilities.
The circular raised red flags over some regulatory authorities allegedly deducting capital expenditure from reported surpluses to reduce remittances to the exchequer, as well as cases where statutory employee deductions are made but not remitted.
Treasury warned that such practices expose institutions to legal and governance risks and infringe on employees’ rights.
All state corporation budgets for the 2026–27 financial year will be processed exclusively through the Government Investments Management Information System (GIMIS), with no hard copies accepted. Entities with incomplete records on pending bills, pension liabilities, or bank balances will be blocked from submitting budgets.
The circular, copied to oversight offices including the Auditor-General, the Controller of Budget, and the Inspector-General of State Corporations, underscores the government’s renewed push for fiscal discipline, tighter wage bill control, and strict compliance with public finance laws.
