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Kenyan Banks Fire Strikers

March 3, 1998

NAIROBI, Kenya (AP) _ Four major banks fired thousands of employees Tuesday for going on strike to protest the Kenyan government’s decision to raise interest rates on employer-subsidized loans.

The Kenya Commercial Bank, the Commercial Bank of Africa, the National Bank of Kenya and Standard Chartered Bank handed out notices to employees who have shut down most banking in the country since Friday.

It was not immediately clear how many of Kenya’s 15,100 unionized bank employees had been dismissed.

The government, under pressure from the International Monetary Fund to increase tax revenues to plug a growing budget deficit, has directed all employers to raise interest rates on employee loans to 22 percent from 15 percent. The additional interest will be added back to salaries and taxed as earnings.

Many firms in Kenya offer employees loans at far below the current market rate of up to 35 percent. In return, companies can deduct the cost of providing the subsidized benefits from employees’ taxable incomes.

The interest rate increase reportedly was proposed by the IMF, which warned last week that in absence of additional measures, Kenya’s overall budget deficit for 1997-98 would reach 3.9 percent of the gross domestic product _ more than double the goal of 1.7 percent.

The IMF agreed with the government on a package of measures, which if implemented, would contain the deficit at about 2.4 percent of GDP.

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