Civil servants to get Sh17.7bn pay increase in new budget

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National Treasury PS, Cris Kiptoo.

Civil servants are set to receive a Sh17.7 billion salary increment in the new financial year that starts on July 1 after the Treasury allocated the money in the budget in what could worsen Kenya’s wage bill crisis.

Treasury Principal Secretary Chris Kiptoo told Parliament that the money had been factored into the 2023/24 estimates following recommendations of a job evaluation by the Salaries and Remuneration Commission (SRC).

“We have allocated Sh17.7 billion for salary increment for civil servants following a job evaluation exercise by the SRC,” Dr. Kiptoo told MPs.

“I and the Cabinet Secretary Njuguna Ndung’u met the SRC last week over the job evaluation recommendations. We are in consultation and once we agree and the decision is officially communicated, we will release the money to various ministries, departments and agencies of government.”

Dr. Kiptoo said the Sh17.7 billion allocation is an indication of the cost of the salary review report that the SRC has presented to the Treasury.

He appeared before the National Assembly’s Committee on Finance and National Planning to explain the ministry’s budget for the financial year 2023/24.

Dr. Kiptoo did not provide the timeline within which the Treasury and the SRC were likely to announce the new salary structures.

An estimated 954,900 civil servants are pushing for salary reviews to compensate for the tough economic times that pushed the country’s inflation to 9.2% in the months of February to April.

“Kenya’s nominal wage bill has been increasing every year. The expenditure on wage bill (Personnel Emoluments – PE) as a proportion of the total expenditure in most counties, has remained above the Public Finance Management (PFM) Regulations, 2015, the recommended ratio of 30% over the recent years,” said the SRC in its Wage Bill bulletin.

The SRC in March announced that it approved pay rise requests worth Sh2.18 billion in the six months to December amid a government push to contain the public wage bill.

The SRC said it received 50 requests from public service institutions on remuneration and benefits estimated to cost Sh2.29 billion but advised the national and county governments to approve requests worth Sh2.18 billion.

Bonus requests topped the list at Sh1.47 billion followed by allowances review and benefits at Sh647.5 million and Collective Bargaining Agreements (CBAs) at Sh325 million.

The Treasury has been struggling to tame the bloated public wage bill that now consumes more than half of the total revenue, impeding spending on development projects.

President William Ruto’s administration slashed the total spending for the current financial year ending June by Sh14 billion in its first mini-budget, including dropping many of his predecessor’s infrastructure projects.

The government is hard-pressed for resources to finance its essential projects in the wake of harsh economic times that have impacted revenue collection.

A harsh economy has impacted key sectors, meaning that the Kenya Revenue Authority (KRA) has struggled to net sufficient collections.

Dr. Kiptoo, on Tuesday,  told the committee chaired by Molo MP Kimani Kuria that the Treasury has recorded a revenue shortfall of Sh87.4 billion.

He said the Treasury had targeted to raise Sh1.7 trillion this financial year but only Sh1.68 trillion had been collected, leaving a shortfall of Sh87.4 billion.

The PS said the below-target revenue collection is on account of ordinary revenue which did not perform as targeted.

The fiscal deficit for the current financial year has been revised downwards from 6.2% of the GDP to 5.7%, reflecting a slight dip in expected debt accumulation.

In the financial year starting July 1, Dr. Kiptoo told MPs that the country has a financing deficit of Sh663.5 billion.

He said the current debt ceiling is Sh10 trillion while the total debt stock stands at Sh9.3 trillion, leaving the Treasury a borrowing headroom of Sh610 billion.

“That is why we have tabled a Bill to change the debt ceiling to a debt anchor. If Parliament does not approve the debt anchor, it means we must live within our means. We have to cut the budget because we can’t break the law,” the PS said.

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