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HomeBusinessWage bill bursts budget by Sh16bn on President Ruto key hirings

Wage bill bursts budget by Sh16bn on President Ruto key hirings


Economy

Wage bill bursts budget by Sh16bn on President Ruto key hirings


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President William Ruto, Deputy President Rigathi Gachagua and Prime Cabinet Minister Musalia Mudavadi take a group photo with the newly sworn-in Chief Administrative Secretaries at State House, Nairobi. FILE PHOTO | PCS

The wage bill for the National Government in the third quarter of this financial year burst the budget by nearly Sh16.55 billion, signalling the expenditure pressure that came with fresh appointments by President William Ruto’s administration.

Expenditure on salaries and wages amounted to slightly more than Sh152.63 billion in the January-March period against a target of Sh136.09 billion, according to the data the National Treasury published.

The over-expenditure of 12.16 percent came at a time President Ruto was at the tail-end of completing the reconstitution of his government through appointments to key positions.

Read: Civil servants to earn bonuses in push to boost productivity

Kenya has for years struggled to contain a ballooning public sector wage bill that has squeezed funds for development, forcing the State to borrow for financing capital projects and paying salaries.

Dr Ruto has, however, vowed not to borrow funds to pay salaries or other recurrent expenditures to support the maintenance and operation of government offices.

That policy led to delays in the payment of salaries for a section of public servants in March, the first in decades, as the government gave priority to debt repayments amid under-performance in tax collections.

“Some characters thought I was joking when I told them, ‘Listen we are going to live within our means’,” Dr Ruto told a media engagement session last Sunday. “Even if we are going to delay salaries for two, three days, we will so that people begin to internalise that we cannot continue borrowing [for recurrent expenditure].”

The Kenya Kwanza administration has further struggled to implement austerity measures that Dr Ruto said when he took power targeted to cut the recurrent budget as much as Sh300 billion to bring “our country to sanity” where the State does not borrow to “finance recurrent expenditure”.

“The problem is that there are serious question marks about policymakers’ ability to keep tightening the fiscal purse strings sufficiently. For one, Kenya’s historical track record is weak when it comes to sustained improvements in key fiscal metrics,” Virág Fórizs, an Africa-focused researcher for UK-based Capital Economics wrote in a note on Kenya on May 3.

“And crucially, it’s not clear to what extent the Ruto administration can deliver additional expenditure savings beyond one-off big-ticket items such as the petrol subsidy scheme.”

Dr Ruto is arguably presiding over one of the most bloated executive arms of the government since Kenya’s Independence.

This is after increasing State departments to 51 from his predecessor’s 44 and further appointing 50 chief administrative secretaries (CASs) whose occupation of office has been suspended by the High Court against 29 previously.

The Kenya Kwanza administration had by March put in place its top leadership team.

The only major exception was that for the CASs whose appointments were made mid-March, but the High Court stopped them from assuming office slightly more than a week later, pending the determination of a case filed by the Law Society of Kenya (LSK) and Katiba Institute.

The increased wage bill in the review period– Sh13.38 billion or 9.61 percent more than the same period last year—put a lot of pressure on government revenue that has been stretched by a jump in debt repayment.

That brought the nine-month expenditure through March to Sh416.86 billion, surpassing the budget for the period by nearly Sh12.20 billion — the first budget overshot for the period in nearly a decade.

The public wage pressure on taxes will mount in the coming months when all 35,550 teachers hired at the beginning of the year start receiving salaries, in addition to further hiring in other essential sectors such as security and health.

The Teachers Service Commission (TSC) in January employed 9,000 teachers on permanent and pensionable terms and a further 21,550 interns for Junior Secondary Schools.

The TSC also hired 1,000 teachers and 4,000 interns for primary schools.

Dr Ruto has pledged to hire a similar number of teachers in the financial year starting in July.

Kenya has maintained a moratorium on new employment in civil service that restricted hiring to essential sectors such as security, education and health since December 2013 in a bid to rein in the public wage bill.

The Salaries and Remuneration Commission (SRC) in 2021 further capped allowances at 40 percent of gross monthly pay as the State moves to lower the public sector wage bill and free up more funds for development projects.

Read: Counties salary budget now at 43pc of revenues

Streamlining of the allowances was aimed at ensuring that basic salary accounts for not less than 60 percent of the gross monthly pay, a shift from the previous unregulated model where allowances accounted for up to 259 percent of the monthly take-home for the public servants.

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