For the first time, Kenya’s total projected revenue is expected to be less than the recurrent spend as public wage bill balloons.
Of the Sh1.45 trillion 20012/2013 Budget presented by the Finance Minister Njeru Githae, recurrent expenditure will take a massive Sh1.003 trillion and the rest will be used for development expenditure.
The recurrent spending is higher by 22 per cent compared to the current fiscal year because of the planned increase in spending in security, constitutional implementation, and education.
But the revenue estimate for the fiscal year 2012/2013 is Sh956.9 billion – an increase of over 20 per cent year-on-year.
“The Kibaki administration has certainly accelerated infrastructure spend and that is for all to see. However, the administration has failed to take a knife to the recurrent expenditure spend,” Aly Khan Satchu, Nairobi-based Investment Analyst, says.
“Our Government has become a supersized hamburger, with supersized French fries and it is this which needs to be tackled.”
Analysts warn that the increase in recurrent spending will strain the economy and starve infrastructure development.
“Most of the increase in spending is on the recurrent budget side, which is negative for inflation.
Strong government spending growth is also negative for Kenya’s external balances, as recent history has shown, it partly translates into growing demand for imports, which is negative for the current account and the shilling,” said Yvonne Mhango, an analyst with Renaissance Capital.
Wage levels in Kenya are among the highest in Africa, thus posing a challenge for country’s competitiveness. In the public service, there are wage differentials between different cadres of officers, with more or less same level of training.
Reason for growth
Under the Constitution, the Salaries and Remuneration Commission is supposed to ensure that the total public compensation Bill is fiscally sustainable.