Economy
The wage bill blows the budget by $16 billion on President Ruto’s key appointments
Friday, May 19, 2023
President William Ruto, Vice President Regati Gachagwa and Chief Cabinet Secretary Musalia Mudavadi take a group photo with the newly installed Administrative Secretaries at the State House in Nairobi. file image | Computers
The National Government’s wages bill in the third quarter of this fiscal year increased the budget by about Sh16.55 billion, indicating spending pressures that came with the new appointments by the administration of President William Ruto.
Spending on salaries and wages came to just over Sh152.63 billion in the January-March period against a target of Sh136.09 billion, according to data released by the National Treasury.
The spending increase of 12.16 percent came at a time when President Ruto was about to finish reshaping his cabinet with appointments to key posts.
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Kenya has struggled for years to contain a ballooning public sector wage bill that has slashed funds for development, forcing the country to borrow to finance capital projects and pay salaries.
However, Dr. Ruto pledged not to borrow money to pay salaries or other recurring expenses to support the maintenance and operation of government offices.
The policy delayed the payment of salaries to a section of public servants in March, the first in decades, as the government prioritized debt repayment amid poor performance in tax collection.
“Some characters thought I was joking when I told them, ‘Listen, we’re going to live within our means,'” Dr. Ruto said at a media briefing last Sunday. Keep borrowing (for recurring expenses).”
The Kenyan Kwanzaa administration has also struggled to implement austerity measures that Dr Ruto said when he took power aimed at cutting recurring budgets by up to Sh300 billion to bring “our country into a sane state” where the state does not borrow to “finance recurrent expenditures”.
The problem is that there are serious question marks over the ability of policymakers to continue to adequately tighten the fiscal portfolio. For example, Kenya’s historical record is poor when it comes to sustained improvements in key financial metrics,” wrote Viraj Forez, researcher specializing in Africa at UK-based Capital Economics in a note on Kenya on May 3.
“More importantly, it is not clear to what extent the Roto administration can provide additional expense savings beyond higher one-off cost items such as the fuel subsidy scheme.”
Arguably, Dr. Ruto presides over one of the most bloated executive arms of the government since Kenya’s independence.
This followed the increase in the number of state administrations to 51 from the previous 44 ministries, and the appointment of 50 principal administrative secretaries (CASs) whose holding of office was suspended by the Supreme Court against the previous 29.
By March, the Kenyan Kwanzaa administration had put together its top leadership team.
The only exception was that for the Legal Aid Tribunal who were appointed in mid-March, but were prevented by the Supreme Court from taking up the position just over a week later, pending a ruling on the case brought by the Law Society of Kenya (LSK) and the Clerk Institute.
The increase in the wage bill in the review period – Sh13.38 billion or 9.61% more than in the same period last year – has put significant pressure on government revenues which have been depleted by a jump in debt repayments.
This took spending for the nine months to March to Sh416.86 billion, exceeding the budget for the period by nearly Sh12.20 billion – the first budget overrun for the period in nearly a decade.
Public wage pressure on taxes will mount in the coming months when all 35,550 teachers hired at the start of the year begin receiving their salaries, as well as more hiring in other essential sectors such as security and health.
The Teachers Service Commission (TSC) in January hired 9,000 teachers on permanent and pensionable terms and an additional 21,550 apprentices for middle schools.
TSC has also employed 1,000 teachers and 4,000 trainees in primary schools.
Dr. Ruto has pledged to hire a similar number of teachers in the fiscal year beginning in July.
Kenya has maintained a moratorium on new civil service recruitment that has restricted hiring to essential sectors such as security, education and health since December 2013 in a bid to curb the public wage bill.
The Salaries and Remuneration Commission (SRC) in 2021 set allowances at 40 percent of gross monthly wages as the country moves to reduce the public sector wage bill and free up more money for development projects.
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The bonus simplification aims to ensure that basic salaries account for at least 60 percent of the total monthly wage, a shift from the previous unregulated model where allowances made up up to 259 percent of the monthly wage for public servants.
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