By James Macharia
NAIROBI (Reuters) - Kenyan members of parliament, among the best paid in Africa, have bowed to public anger by accepting their first pay cut - but only in exchange for a tax-free car grant, pensions and extra allowances, officials said on Wednesday.
The announcement of the reduction - to around $75,000 (6.38 million Kenyan shillings) a year from the $120,000 members of the last parliament earned - came a day after hundreds massed outside parliament denouncing MPs as "MPigs".
"Don't like the pay? Quit," the protesters shouted, in the latest in a series of demonstrations in a country where the annual minimum wage is just over $900.
Analysts said the agreement was part of a compromise between MPs and the country's Salaries and Remuneration Commission, which sets public pay.
Kenya's new President Uhuru Kenyatta has backed the commission, in his bid cut Kenya's vast public sector wage bill to free up cash for investment.
"It's a win-win situation for both sides," said commission spokesman Ali Chege.
The lower $75,000 annual basic salary was originally set by the commission before closely-fought March elections.
But Kenya's newly-elected MPs rejected that ruling soon after coming to power and in May overwhelmingly voted to raise their pay back to the old rate - around 130 times the minimum wage.
Kenyatta urged MPs to have a rethink, and the salaries commission said on Wednesday a deal had been struck.
MPs would get a 5 million shilling ($58,800) tax-free grant to buy a car, instead of the 7 million shilling loan that was originally proposed by the salaries commission.
Mileage allowance were raised and a cap was removed on the number of times parliamentary committees could meet. Lawmakers get allowances for attending sessions.
The commission also agreed to scrap plans to cancel pension payments.
One lawmaker said most MPs were unhappy with the deal signed on their behalf by the Parliamentary Service Commission, which oversees their welfare.
"It amounts to a reduction of what the MPs were seeking," said Irungu Kangata, a lawyer and MP representing Kenyatta's party, told Reuters.
"However, the MPs do not seem to want to put up a fight anymore, maybe because the president has been involved, they do not want to appear to go against him."
Lawmakers argue that they need high wages because constituents expect them to provide charitable support.
The new pay amounted to 532,000 Kenyan shillings a month. France and India - both with higher per capita income compared to Kenya - pay lawmakers the equivalent of about 522,000 shillings and 584,000 shillings respectively, the salaries commission said earlier this year.
Closer to home, in neighboring Uganda, lawmakers earn 514,000 shillings a month, while in Ghana they make 320,000 shillings.
"It was a compromise on both sides, a retreat for MPs in the face of public pressure. It also allows the salaries commission to save face, although it yielded ground," said Macharia Munene, a lecturer on international relations at the United States International University in Nairobi.
($1 = 85.1000 Kenyan shillings)
(Additional reporting by Humphrey Malalo; Editing by Andrew Heavens)