The national government's expenditure on salaries and wages in the first half of the current financial year increased at the fastest pace in five years despite suspended hiring and a freeze on salary raises.
Statistics from the National Treasury indicate the national wage bill amounted to Sh293.34 billion in six months ended December 31, 2024-- a 9.36 percent growth over Sh268.23 billion the year before.
That marked the quickest increment in the review period since the financial year 2019/20 when staff costs for National Government bumped 11.95 percent to Sh225.71 billion.
The rise came despite President William Ruto's administration blocking new recruitments in government, except for essential sectors such as security, education, and health, in a bid to rein in the public wage bill.
The moratorium on recruitment was part of spending cuts aimed at freeing up cash to fund development projects. The decision to freeze hiring was underlined following the withdrawal of the tax bill because of deadly youth-led anti-government protests, creating a projected Sh344.3 billion revenue hole in the budget.
“To contain the wage bill, the government implemented a wage freeze in the financial years 2021/22 and 2022/23, in addition to eliminating and streamlining a number of allowances,” former Treasury secretary Njuguna Ndung’u said in the Budget Statement for the current financial year ending June.
“In order to move towards a balanced budget and further improve efficiency in public spending… bold actions and reforms have been outlined in the financial year 2024/25 … [including] suspension of all new recruitment for the next one year; audit and cleanse all public payrolls.”
The growth in the wage bill came before the Teachers Service Commission converted the contracts of 46,000 interns into permanent and pensionable terms at the beginning of January, raising the wage bill further in the second half of the year.
The staff cost for government workers is expected to come under further pressure following the creation of seven more State Departments following the formation of a broad-based government after Dr Ruto signed a collaboration pact with the main opposition ODM Party.
Dr Ruto will probably be presiding over one of the most bloated executive arms of the government since independence if all his top appointees for Principal Secretaries’ positions get the green light to assume office.
The successful vetting process will result in the number of state departments, headed by principal secretaries, to 57 from the current 51 offices. The number of PSs will be higher than Dr Ruto predecessor's 44.
Such offices come with an increased burden to the taxpayers who shoulder the pay for the aides of the appointees as well as the cost to run and maintain the offices. Restraining the growth of the public sector wage bill is one of the conditions of the International Monetary Fund which the government has failed to meet since 2013.
The term led to the Treasury slapping a moratorium on new employment in civil service in December 2013, restricting hiring to security, education, and health sectors. The freeze has since been renewed upon expiry, with no new employment allowed unless with concurrence from the National Treasury.
Failure to meet the IMF obligations led to the collapse of talks between the Brettonwoods institution and the government over the ninth review of the 38-month $3.6bn (Sh465.78billion) budgetary support programme which ends in April.
The two parties have agreed to pursue a new deal after the termination of the final review which would have unlocked an estimated Sh110 billion towards budgetary support.
“Agreeing a new IMF programme will prove tricky. The Fund is unlikely to back down on its demands for further fiscal consolidation and it’s unclear whether the Kenyan authorities have the political capital to push through austerity,” wrote Jason Tuvey, deputy chief emerging markets economist at UK-based Capital Economics in a note on Kenya on March 21.
Kenya has for years struggled to contain a ballooning public sector wage bill that has squeezed funds for development, forcing the State to go loans for financing capital projects and paying salaries.
He added: “Tax hikes are off the table and, while the 2025/26 Budget showed that the Treasury thinks it can significantly raise revenues without increasing tax rates, that’s likely to prove difficult to realise. Even if a new deal is agreed with the Fund soon, we’d be skeptical that fiscal targets would be met, especially with elections scheduled to take place in 2027.”
Dr Ruto, who took power in September 2022, pledged not to borrow funds to pay salaries or other recurrent expenditures to support the day-to-day maintenance and operation of government offices.
The administration has, nonetheless, failed to honour its pledge with Sh415.7 billion or more than half of the Sh766.4 billion it borrowed last financial year ended June 2024 going into recurrent expenses such as payment of salaries and utilities.
This was a jump of 82.5 percent over Sh227.7 billion or 23.1 percent of borrowed money that was spent on recurrent votes, underlining the continued breach of financial management law.
Section 15(2) of the Public Finance Management (PMF) Act 2012 requires that the government should use borrowed funds solely to fund development projects.
