* Lawmakers award themselves $110,000 end-of-term bonus
* Country faces rising wage bill, economic slowdown
* President declines to approve pay proposals
(Adds Kibaki turns down MPs deal)
By Duncan Miriri
NAIROBI, Oct 9 (Reuters) - Kenyan President Mwai Kibaki on Tuesday blocked $110,000 end-of-term bonuses members of parliament awarded themselves after protests and a public outcry at a time when the state has raised taxes to plug a hole in its finances.
Lawmakers in east Africa's biggest economy, already among the best paid in the world, voted to triple the bonus they will all receive when their five-year term ends in January to 9.3 million Kenyan shillings ($109,500).
The total cost, around 2 billion shillings, angered many taxpayers who already consider many of Kenya's members of parliament lazy, corrupt and greedy.
More than 100 Kenyans marched to parliament in the capital Nairobi on Tuesday, punching the air, singing songs and waving placards reading "Wanted! Honest Leaders".
"Enough is enough," shouted Fredrick Odhiambo, a civil rights activist. "What have they done for Kenyans to award themselves extra cash? Kenyans are the ones who pay taxes. They don't pay taxes."
The legislators earn about $13,000 a month, the bulk in tax-free allowances, a huge figure in a country where an unskilled urban labourer may earn as little as $60 a month. Last year the MPs refused to pay back taxes demanded by the government, then bought new chairs worth $2,400 each for themselves to sit on.
But late on Tuesday Kibaki said he had refused to approve the bonus "on the grounds that it was first unconstitutional and secondly untenable in the prevailing economic circumstances in the country".
In a statement from the presidency, Kibaki said: "the severance pay for parliamentarians would lead to an unsustainable wage bill at a time when the country requires massive resources to implement the new constitution and meet other competing demands in the economy."
According to the constitution, lawmakers can still force through the bonus if they can muster a two-thirds majority in parliament.
But with elections looming in March, the deputies may opt to avoid a showdown with the president out of fear of provoking an even worse public backlash, said a parliamentary official who declined to be named.
The proposed bonus has especially angered many as it comes less than a week after Finance Minister Robinson Githae introduced new taxes on resource, telecommunications and financial firms to close a 40 billion shilling funding gap for the current financial year.
Apart from a ballooning wage bill following pay rises for striking teachers and doctors, economic growth has slowed and unemployment remains uncomfortably high, while the run-up to the national election in March is likely to trigger a splurge of government spending.
($1 = 84.9000 Kenyan shillings)
(Additional reporting by Drazen Jorgic; Editing by James Macharia and Jon Hemming)
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Keywords: KENYA PARLIAMENT/