Public wage bill crosses Sh500bn mark for first time
The latest data from the Central Bank of Kenya shows the bill shot up by 5.5 per cent to hit a record Sh520.03 billion in the year to June, increasing by Sh27 billion from Sh493.03 billion in the previous year.
What you need to know:
- Bill shot up by 5.5 per cent to hit a record Sh520.03 billion, increasing by Sh27 billion from Sh493.03 billion in the previous year.
- Government measures have borne little fruit in taming the rising wage bill, which is heavily inflated by fat allowances to civil servants.
- It could get even worse as the government this year lifted a five-year hiring freeze in parastatals, allowing the state entities to hire new staff without state approval.
The public wage bill crossed the half-a-trillion mark for the first time in the year ended June, new data shows, exerting huge pressure on the country’s thinned revenue envelope.
The latest data from the Central Bank of Kenya shows the bill shot up by 5.5 per cent to hit a record Sh520.03 billion in the year to June, increasing by Sh27 billion from Sh493.03 billion in the previous year.
That was more than double the figure of Sh274.4 billion in the FY 2012/13 before President Uhuru Kenyatta took office, even though he and Mr William Ruto rode to power on the promise of consolidating and rationalising the civil service to eliminate overlaps and duplication of functions.
Government measures such as freezing public sector hiring for non-priority staff have borne little fruit in taming the rising wage bill, which is heavily inflated by fat allowances to civil servants.
It could get even worse as the government this year lifted a five-year hiring freeze in parastatals, allowing the state entities to hire new staff without state approval.
The National Treasury has in recent budget cycles ordered ministries, departments and agencies not to allocate resources for new recruitments or interns, and not to upgrade job groups without its approval.
Indeed, Mr Ukur Yatani, the Cabinet Secretary for the National Treasury, said in his 2022 Budget Policy Statement that “the Government has been cutting down on non-priority expenditures such as hospitality, training, travel, and freezing of employment in non-priority sectors in order to manage the public wage bill”.
The high spending on civil servants’ wages, salaries and benefits and other recurrent expenditures such as pensions and debt servicing are putting a huge strain on the budget, leaving little room for expenditure on development projects to spur economic growth.
Recurrent spending
The government’s fiscal consolidation plan to lower the deficit and slow down the accumulation of debt has, however, helped slow down the growth of recurrent spending.
Its recurrent ceiling growth has declined from 10.3 per cent in the financial year 2017/18 to 1.2 per cent in 2022/23.
The Kenya Revenue Authority collected a record Sh2.031 trillion in revenue in the year to June, with Sh370 billion allocated to the 47 counties as an equitable share of the revenue.
This means that 31.3 per cent of the Sh1.661 trillion revenue earmarked for spending by the national government was spent on paying salaries and benefits, which is just over three percentage points from breaching the legal limit.
The law requires that the national government’s expenditure on the compensation of employees not exceed 35 per cent of its equitable share of the revenue raised nationally.
While high, this is an improvement on the previous financial year, where 34.3 per cent of the revenue raised went towards settling the public wage bill.
Kenya has committed to reducing the public wage bill as one of its fiscal reforms following the signing of its 38-month loan facility with the International Monetary Fund.
In December last year, the Treasury told the lender that it aims to contain the ratio of the government wage bill to the Gross Domestic Product.
The gains are likely to be eroded by county governments, which appear to be living way beyond their means.
Data shows that 34 county governments spent more than 35 per cent of their revenues on wages and benefits in the fiscal year 2020/21, contrary to the law.
Only 13 counties spent within the legal limit on salaries. West Pokot County had the lowest expenditure on wages and benefits, at 16.7 per cent, followed by Wajir and Vihiga counties at 27 and 28.1 per cent, respectively.
On the flip side, Baringo County spent the highest proportion on salaries, at 57.4 per cent, followed by Bomet at 55.1 per cent and Bungoma at 53.4 per cent.
