Bulk of revenue collected by KRA goes towards servicing debts, paying salaries

For every Sh100 collected by the Kenya Revenue Authority (KRA), Sh47 goes to paying salaries, interest on debts and pension, the latest data from the National Treasury shows.

According to the 2018 Budget Policy Statement by the Treasury released on Monday, the public sector wage bill has increased by nearly Sh100 billion over the last three years despite the Government’s efforts to tame recurrent expenditure.

Treasury predicts the wage bill, which stood at Sh307 billion in 2015 and has since risen to Sh401 billion, will hit Sh444 billion next year.

Data from the Budget Statement shows the country will pay Sh304 billion as interest on loans and Sh76 billion as pensions next year.

Treasury Cabinet Secretary Henry Rotich attributes the rising trend in the wage bill to the recent hefty perks awarded to striking teachers and doctors as well as a pay rise for the police.

Although Treasury admits that the economy is exposed to risks, including public expenditure pressures, especially recurrent expenditures, it says the economy will grow fast enough to accommodate the huge wage bill.

“In terms of percentage of GDP, the wages and salaries bill for teachers and civil servants, including the police, is expected to reduce to 4.5 per cent of GDP in the FY 2018/19 from 4.6 per cent in the FY 2017/18,” said Mr Rotich in the budget statement.

The spike in the wage bill is despite rationalisation of the public service workforce over the last six years by the Salaries and Remuneration Commission (SRC) through a digital audit to weed out ghost workers and freezing employment in State agencies.

According to the budget statement, in just five months of the current financial year, the national government has already overshot its budgeted expenditure.

Recurrent expenditure amounted to Sh510.2 billion against a target of Sh494.8 billion, representing an overspend of Sh15.4 billion.

“The faster spending was mainly recorded in operations and maintenance, which accounted for Sh35.6 billion and higher-than-programmed domestic interest payments of Sh12.0 billion,” said Rotich.

Budget deficits

The State spent S720 billion despite slowing down development projects and denying counties cash due to the delayed enactment of the County Revenue Allocation Act.

“Total expenditures and net lending amounted to Sh720.2 billion against a target of Sh824.2 billion, falling below target by Sh104.0 billion at the end of November 2017,” said the CS.

The Government has been living beyond its means, often resulting in huge debt-funded budget deficits and missed revenue targets.

By the end of last November, the total cumulative revenues, including Appropriation in Aid amounted to Sh558.4 billion against a target of Sh611.0 billion.