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.

The public sector wage bill has increased at an annual average of 36 per cent over the last five years. The bulk of the growth is attributed to the hefty salaries of senior public servants, which have risen disproportionately in comparison to those in the lower and middle echelons of the service.

The 2012 Economic Survey shows Kenya’s nominal wage bill rose to Sh878.7 billion, an 8.8 per cent growth from Sh807.9 billion paid out in 2010.

The public sector wage bill went up by 11.7 per cent compared to an increase of seven per cent in 2010.

Overall, all the employers in the public sector registered an increase in their wage bill last year. But the private sector wage bill rose by 7.4 per cent from Sh547 billion in 2010 to Sh587 billion last year.

Average earnings per person were higher in the public sector than in the private sector. The report adds that the contribution of the public sector to the total wage bill in the modern sector increased marginally from 32.3 per cent in 2010 to 33.2 per cent last year.

In the past, many people only joined the public service when they could not get a better-paying job in the private sector. The trend has changed.

Today, people will leave plum jobs with blue chip companies, non-governmental organisations, top audit firms, and high-profile law firms to scramble for jobs in public service.

The change in fortunes of government employees is partly attributed to the reforms that the Kibaki administration has pursued since coming to power in 2003.

Unless this level of wage bill is checked going forward, the Government will not be able to provide adequate resources for operations and maintenance, let alone fund critical development programmes.

Experts are calling for urgent austerity measures to curb further rise in wage bill that has put pressure on infrastructure spending.

A bigger wage bill, economists warn, was likely to hurt spending on infrastructure and social services like health and education at a time when countries are facing thinning resource envelopes as harsh economic conditions diminish tax revenues.

To steer Kenya’s economy to the next phase of growth, as Kibaki’s term ends, Kenya needs a government that has a lighter footprint.

 “This is a political decision. We need a leader who is brave and strong and can tackle the bloated administration like a surgeon with a sharp scalpel,” Satchu said.

Kenya, the region’s economic giant is this year implementing one of the most ambitious devolution projects in the world which involves transferring some of the functions in the central government and the money to 47 new county governments.

The massive resource dedicated to devolution means that the Government must strike a delicate balance between redistribution of resources to counties