State eyes Sh51bn savings in salary, allowances cuts

What you need to know:

Treasury is targeting to save Sh51 billion in the cut on non-priority spending captured in the supplementary budget.
The cut comes as the Kenya Revenue Authority recently reported it missed its half-year tax collection targets by a massive Sh47.6 billion.
President Uhuru Kenyatta has made reducing Kenya’s ballooning public sector wage bill a top priority.

The Treasury is preparing massive cuts on civil servants’ travel, pay and allowances budgets this financial year.

Documents tabled last week in Parliament by the Controller of Budget indicate that the Treasury is targeting to save Sh51 billion in the cut on non-priority spending captured in the supplementary budget.

Pay, allowances and travel budgets will be slashed by the biggest margin as part of austerity measures meant to reduce the government wage bill and free up funds for use in development.

The budget for basic salaries has been cut by Sh12 billion to Sh151.5 billion, signalling a freeze in hiring and pay rises since the government has ruled out job cuts.

Allowances, which have made public service an attractive employer with a number of benefits not provided by private companies, have been reduced by Sh28 billion to Sh75 billion.

Currently, allowances have the effect of doubling employee’s pay and analysts want the perks capped at between 10 and 25 per cent of a civil servant’s basic pay.

Travel budget has dropped by Sh3 billion to Sh19.7 billion with the budget for staff training being slashed by Sh6 billion to Sh20 billion.

The cut comes as the Kenya Revenue Authority (KRA) recently reported it missed its half-year tax collection targets by a massive Sh47.6 billion.

READ: Tough times ahead as taxman misses half-year revenue target

The revenue drop has also made it urgent for the Treasury cut non-priority spending in the quest to balance the books and ease borrowing.

If Parliament passes the supplementary budget as it is, the Treasury expects that savings on wage bill will be biggest at Sh40 billion. However it has not offered explanations on how this savings will be achieved.

Despite publicly ruling out job cuts, the government, in talks with the International Monetary Fund (IMF) has repeatedly mentioned layoffs as way of reducing the wage bill.

Kenya’s public wage bill – including ministries, departments, agencies, commissions, the disciplined forces and independent constitutional offices – is estimated at Sh568 billion or 11 per cent of the gross domestic product (GDP) compared to the global best practice of seven per cent.

At Sh568 billion, the public wage bill also stands at more than 50 per cent of total revenues against globally recommended threshold of not more than 35 per cent.

President Uhuru Kenyatta has made reducing Kenya’s ballooning public sector wage bill a top priority.

Pay increments in the public sector has seen the average pay of the government worker race ahead of private sector employees, underlining the civil service’s status as the best paying segment of the economy.

Official data put Public servants’ average pay average at Sh49, 739 per month in 2014 compared with Sh44, 806 for the private sector.