Kenya is courting a fiscal crisis caused by a rapid growth of the public sector wage bill, a report by the Salaries and Remuneration Commission (SRC) has warned.
The report titled ‘Public Sector Remuneration and Benefits Policy Framework” dated June 2015, points out that the problem stems from non-compliance with the principles for determination of remuneration and benefits as stipulated in the 2010 Constitution.
“It is increasingly becoming a reality that Kenya could be heading towards a fiscal crisis caused by very rapid growth of public sector wage bill. The problem has been highlighted in recent government’s annual budget and economic reviews,” reads the report signed by SRC chair Sarah Serem.
SRC prepared the report following the need for a strategic approach to address fundamental issues and challenges that continue to undermine the Kenya Public Sector Remuneration and Benefits System. It points out that the rise in the wage bill has considerably exceeded the gross domestic product growth.
“The annual growth rate in the public sector wage bill almost stabilised at 20.9 per cent over the past three years. This figure surpasses the corresponding rate of growth in the number of public servants,” states the report.
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The document projects that a persistently high public sector wage bill might eat into resources that should otherwise be used in social and infrastructural development.
“It may also lead to large fiscal deficits which contribute to macro-economic instability such as inflation, wage price spiral and exchange rate impact,” notes the report.
The report says the overall level of government pension expenditure has increased significantly in the last two decades to about Sh31 billion by 2013.
“Based on an actuarial analysis undertaken in 2014, the government pension expenditure was projected to increase significantly in coming years as the pension liabilities mature,” states the report.
As a way forward, the report highlights nine medium term policy objectives for the public sector.
They include reducing the size of the public sector wage bill and eliminating gaps in fairness in public sector remuneration and benefits system. Further the paper says, inefficiency, corruption, pilferage and other leakages from the public resources management systems and duplicated governance must also be addressed.
