The National Treasury has cut funding to the State corporations that were merged or dissolved early his year, targeting to permanently end financing for scrapped entities by July 2026.
Treasury Cabinet Secretary (CS) John Mbadi said that it removed allocations to the agencies, leaving only salary budgets, as some were dissolved and others started transitioning to new formations.
“In this financial year, we tried to reduce the budget for those entities to the bare minimum for salaries just to transition, and many of them have been dissolved.
In January, the government merged 42 State corporations and agencies to form 20 entities, dissolved nine, restructured and divested from 12, and declassified 17 public funds and professional organisations.
Treasury says its directorate of public investment and portfolio management is progressing with merger, dissolution and restructuring processes, with more budget cuts expected from the next fiscal year.
The government targeted State corporations with overlapping mandates, duplicate staffing structures and those whose functions are largely obsolete, targeting to save billions of shillings in administration costs and personnel benefits.
The Parliamentary Budget Office (PBO) —which advises lawmakers on economic and budget affairs— estimated that recurrent budgets for targeted State corporations in the current fiscal year are Sh118 billion, majorly borne by the agencies that have been targeted for merger.
Some of the agencies marked for merger include the Tourism Promotion Fund and the Tourism Fund, which have a recurrent budget of Sh8.2 billion in the current fiscal year.
The government also merged Uwezo Fund, Women Enterprise Fund and the Youth Enterprise Development Fund, which have a collective recurrent budget of Sh787 million, into one entity.
Recurrent budgets constitute expenses such as administrative costs and salaries for employees.
“We are already acting, and my directorate of public investment and portfolio management is already progressing very well with the process of restructuring of our state-owned enterprises,” Mr Mbadi said.
The government is also dissolving nine agencies with a combined recurrent budget of Sh1.62 billion, including Lapsset Corridor Development Authority and Kenya Film Classification Board.
Treasury has, however, addressed concerns over the fate of employees working in affected entities, stating that they will not be laid off unless they opt to exit voluntarily.
“The employees will not lose their jobs; we will find a way of either mainstreaming them back to the ministries or moving them to the merged institutions. Some who would want to opt to leave will also be helped to exit. But we don't want to disrupt the livelihoods of people by that action,” Mr Mbadi said.
The PBO had warned that just shutting the eight regional development agencies that were recommended to be dissolved would risk 1,629 jobs, an action that could trigger legal and political repercussions.
Entities affected by the mergers, divestitures, and dissolutions span key sectors such as education, tourism, agriculture, infrastructure, water, and trade.
Most of them have been hammered for implementing roles that are already being undertaken by constitutional bodies such as county governments and ministries, thus wasting public funds.
“The economic benefits from the state corporations have predominantly been lower compared to the expenditures, mainly due to overlapping mandates, duplicate staffing structures, and fragmented service delivery. Potential annual savings are likely to be attributed to reduced personnel costs, unified ICT systems, and consolidated procurement functions,” PBO stated in a report last month.
