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UPDATE 1-Kenya president blocks parliament bonus pay

* 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 onTuesday blocked $110,000 end-of-term bonuses members ofparliament awarded themselves after protests and a public outcryat a time when the state has raised taxes to plug a hole in itsfinances.

Lawmakers in east Africa's biggest economy, already amongthe best paid in the world, voted to triple the bonus they willall receive when their five-year term ends in January to 9.3million Kenyan shillings ($109,500).

The total cost, around 2 billion shillings, angered manytaxpayers who already consider many of Kenya's members ofparliament lazy, corrupt and greedy.

More than 100 Kenyans marched to parliament in the capitalNairobi on Tuesday, punching the air, singing songs and wavingplacards reading "Wanted! Honest Leaders".

"Enough is enough," shouted Fredrick Odhiambo, a civilrights activist. "What have they done for Kenyans to awardthemselves extra cash? Kenyans are the ones who pay taxes. Theydon't pay taxes."

The legislators earn about $13,000 a month, the bulk intax-free allowances, a huge figure in a country where anunskilled urban labourer may earn as little as $60 a month. Lastyear the MPs refused to pay back taxes demanded by thegovernment, then bought new chairs worth $2,400 each forthemselves to sit on.

But late on Tuesday Kibaki said he had refused to approvethe bonus "on the grounds that it was first unconstitutional andsecondly untenable in the prevailing economic circumstances inthe country".

In a statement from the presidency, Kibaki said: "theseverance pay for parliamentarians would lead to anunsustainable wage bill at a time when the country requiresmassive resources to implement the new constitution and meetother competing demands in the economy."

According to the constitution, lawmakers can still forcethrough the bonus if they can muster a two-thirds majority inparliament.

But with elections looming in March, the deputies may opt toavoid a showdown with the president out of fear of provoking aneven worse public backlash, said a parliamentary official whodeclined to be named.

The proposed bonus has especially angered many as it comesless than a week after Finance Minister Robinson Githaeintroduced new taxes on resource, telecommunications andfinancial firms to close a 40 billion shilling funding gap forthe current financial year.

Apart from a ballooning wage bill following pay rises forstriking teachers and doctors, economic growth has slowed andunemployment remains uncomfortably high, while the run-up to thenational election in March is likely to trigger a splurge ofgovernment spending.

($1 = 84.9000 Kenyan shillings)

(Additional reporting by Drazen Jorgic; Editing by JamesMacharia and Jon Hemming)

((nairobi.newsroom@reuters.com)(Tel: +254 20 2224717))

Keywords: KENYA PARLIAMENT/

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