Cut expenditure to control borrowing, think tank advises the State

IEA has said tax revenues are no longer sufficient to meet recurrent spending and the Government [File, Standard]

The Government must cut the public wage bill, the number of parastatals and new projects if it is to manage the huge financing gap that has led to massive borrowing, an economic think tank has said.

The Institute of Economic Affairs (IEA) has said tax revenues are no longer sufficient to meet recurrent spending and the Government should explore the option of retiring its huge workforce.

“The Government needs to rein in recurrent expenditure through a combination  of restricting non-core spending, streamlining public service sector, employing retrenchment programmes and temporarily freezing employment,” said IEA Programmes Coordinator John Mutua during a post-budget briefing in Nairobi.

Owing to expenditure growing at a faster pace than revenue, the Government has been running on widening deficits from 6.4 per cent in 2013/14 to 9.3 per cent in the 2016/17 financial year.

Treasury is targeting a shortfall of 7.2 per cent this year and further lowering it to 5.7 per cent in 2018/19 to reduce the amount of money it has to borrow.

Mr Mutua said that on average, the wage bill was growing at twice the pace of the country’s gross domestic product. The expenditure grew from Sh375 billion to Sh549 billion, a 10 per cent rise compared to 5.5 per cent GDP growth.

Increased recruitment

“Growth in the public wage bill is partly due to increased recruitment (662,300 public sector employees in 2013 to 790,200 in 2017) and general increase in average wage earnings per worker,” said Mutua.

Although the wage bill has been below the global average of seven per cent of the GDP, Kenya breached the ceiling in 2017. IEA says that in 2017, and projections for 2018, the bill is likely to exceed the 35 per cent principal responsibility threshold. Mutua urged the State to implement the resolutions of the Capacity Assessment and Rationalisation of Public Service, a radical streamlining of the public service instituted by former Devolution Cabinet secretary Anne Waiguru.

He added that it should also implement the report on rationalisation of parastatals from a task force that proposed far-reaching reforms in State bodies