The National Treasury has deferred payments totalling Sh54.5 billion to the current financial year on the back of additional funding for the operation and administration of offices as well as remuneration of staff which were not in originally approved budgets.
Disclosures from the Treasury show more than 30 State departments and agencies had their recurrent budgets reviewed upwards by Sh57.26 billion in the course of the last fiscal year that ended June, pointing to inherent poor projections in expenditure plans.
The additional funding pushed recurrent expenditures to Sh1.36 trillion in June compared with Sh1.30 trillion estimates at the beginning of the year.
The cash requests, granted through two supplementary budgets, largely hit payment of retired public servants and disbursements of equitable shares to the 47 counties.
Payment of pension and gratuity to retirees — a priority disbursement under Public Finance Management law — fell short of the targeted budget by Sh40.14 billion to Sh148.95 billion, while counties received Sh30.83 billion less than Sh385.42 billion for the year ended June 2024.
As a result, the Treasury has won approval from lawmakers to carry over payments of Sh30.8 billion to the current fiscal year ending June 2025 despite heightened budget cuts after the plan for new and higher taxes collapsed.
Treasury has further been allowed to increase the pension bill by Sh23.7 billion, the bulk of which will cater for payments that were due last year amidst President Ruto’s directive that all public workers exit immediately after they reach retirement age.
This came despite an earlier commitment by the Treasury to reject cash requests beyond what was originally approved, except for critical sectors such as security and education.
“In order to maintain the primary balance consistent with the fiscal consolidation path, expenditures have to be maintained at the levels approved in printed estimates,” the Treasury officials said in the Budget Review and Outlook Paper for the fiscal year ended June.
“In this respect, additional spending pressures will be accommodated within the approved ceilings, that is reallocation possibilities, except those of the security and education sectors” the document added.
Article 223 of the Constitution, activated through Section 36(9) of the Public Finance Management (PMF) (National Government) Regulations, enables State offices to spend as much as 10 percent above the cash approved by the National Assembly.
The Constitution requires the Treasury to table in the House a mini-budget two months after the withdrawal of unbudgeted money from the Consolidated Fund without the approval of the Members of Parliament.
The PFM regulations, however, bar legislators from approving a supplementary budget that exceeds 10 percent of “the approved budget estimates of a programme or sub-vote unless it is for unforeseen and unavoidable need”.
The Treasury data shows that the State House was amongst the biggest beneficiaries of the two supplementary budgets approved by lawmakers last financial year. State House’s recurrent withdrawals — which cater for the day-to-day cost of operation, administration, and remuneration of staff — were raised by 57.36 percent, or Sh3.65 billion, to Sh10.02 billion from the original estimates of Sh6.37 billion.
The recurrent expenditure for the Executive Office of the President (Harambee House) also went up Sh408.17 million, 11.36 percent, to Sh4.0 billion from Sh3.59 billion.
The Office of the Deputy President Rigathi Gachagua received nearly Sh1.07 billion, or 32.45 percent, more funding to hit Sh4.35 billion, while that of the Prime Cabinet Secretary Musalia Mudavadi got 6.33 percent more to Sh1.27 billion.
The State Department for Forestry’s recurrent spending exceeded the original budget by more than half (53.27 percent), or Sh2.97 billion, to stand at Sh8.54 billion, while that for Crop Development surpassed the initial estimates by 50.96 percent to Sh11.70 billion.
The Forestry Department is in charge of President William Ruto’s National Tree-Planting Initiative targeting 15 billion trees by 2032, while the Crop Development docket is tasked with boosting food production, including a fertilizer subsidy programme.
“Focusing primarily on supplementary budgets, increases in recurrent expenditure are seen under some BETA [Bottom-Up Economic Transformation Agenda] initiatives like the reforms in higher education, the employment of more teachers of TSC, Coffee Revitalisation Programme, Human Resources for Health Internship, among others,” Abraham Rugo, International Budget Partnership's Country Manager for Kenya, to the Business Daily earlier in April.
“Governments are meant to exist and deliver services perpetuity which means that as the size of government grows, recurrent expenditures are likely to increase indefinitely. However, this does not mean that there are no wastages or inefficiencies in the public sector that drive a wedge between productivity and compensation (wages).”
The Treasury data shows Higher Education and Research’s recurrent expenditure surpassed original estimates by Sh3.56 billion, or 4.4 percent, to Sh82.90 billion. Basic Education exceeded initial projections by Sh1.70 billion, or 1.35 percent, to Sh127.33 billion, while Public Health went up Sh1.58 billion, or 13.28 percent, to Sh13.51 billion.
The security dockets were amongst the top beneficiaries in a period they battled opposition-led anti-government protests over the deepening cost of living crisis earlier last fiscal year.
The recurrent expenditure for the Internal Security Department overshot original estimates by Sh6.65 billion, or 24.65 percent, to Sh33.62 billion, the National Police Service’s increased Sh4.07 billion, or 3.89 percent, to Sh108.72 billion, while the National Intelligence Service’s was Sh8.25 billion, or 18.62 percent, to Sh52.55 billion.
“The Kenyan government [under Dr Ruto] had initially made good progress in tackling the poor public finances. There have been signs of fiscal slippage recently, though, as spending has increased and revenues have underperformed,” Jason Tuvey, deputy chief emerging markets economist at UK-based Capital Economics, wrote in a note on Kenya late June. “That spurred the government, in the 2024/25 Budget, to outline a raft of tax increases in a bid to get its fiscal consolidation plans back on track.”
