SRC review puts Kenya on collision course with IMF, lending partners

President William Ruto at the unveiling of Digital Government services at the KICC, Nairobi, on June 30, 2023. [PCS]

The Salaries and Remuneration Commission earlier this week unveiled a new salary structure that will see the country's public wage bill rise by at least 14 per cent starting July 1.

The new review will see the President earn Sh1.5 million, up from Sh1.4 million while the Deputy President will take home Sh1.3 million, 11 per cent higher than the Sh1.2 million he is currently earning.

President William Ruto Friday, June 30, said the salary increment will have to wait until the SRC has justified the latest review against international best practice.

"I have instructed the SRC to give us international best practices because we need to reduce the gap between all of us who work for the people of Kenya," he said.

"It's not possible that the people at the top earn 100 times more than those at the bottom, it's not right because we live in the same country."

The new review from the SRC however puts the country at odds with the International Monetary Fund, IMF and the World Bank that have in recent years called on the Government of Kenya to cut the high wage bill as a condition for accessing more concessional finances.

In 2021 the IMF approved a Sh234 billion facility to support the government's spending plan in the wake of the Covid-19 pandemic that had depressed economic activity and the country's revenues.

As part of the new facility, however, the IMF identified key areas of the public sector that require significant reforms to cut public spending. These include state-owned enterprises and parastatals, public procurement and the public sector wage bill.

"On the expenditure side, efforts aim at restraining recurrent expenditure -particularly through a gradual reduction in the wage bill and transfers to public sector entities - and improving the efficiency and effectiveness of government spending consistent with recommendations in the recent Public Expenditure Review undertaken by the World Bank," stated the IMF in documents detailing the facility.

Data from the National Treasury and IMF projections indicate that taxpayers forked out Sh493 billion in wages and benefits to the civil service in 2021, marking an increase of Sh44 billion from 2020.

This is projected to jump to Sh535 billion for the 2022/2023 financial year and Sh635 billion by next year, a trajectory the IMF says is unsustainable.

The new salary reviews will further push this figure by at least 14 per cent, putting the Kenyan government at odds with her lending partners.

According to the World Bank, cleaning and regular audits of the payroll for ghost workers, strengthening payroll systems control and rationalisation of allowances could save taxpayers Sh19.4 billion.

The World Bank further states that public sector employment has risen by 15 per cent between 2015 and 2019, a period that saw wages in the public sector increase by 45 per cent.

This has largely been attributed to county governments which added staff by 6.8 pr cent to stand at 190,000 employees.

"Employment in ministries and other extra-budgetary institutions registered a growth of 4.0 per cent while the Teachers Service Commission (TSC) which is the highest employer in the public sector, registered 2.8 per cent growth in employment," explained the World Bank.

In its latest job evaluation review, the World Bank found that public sector pay is competitive and remuneration is adequate, translating to a low turnover of personnel.

The SRC has previously defended Kenya's wage bill, stating that the cost as a percentage of GDP has remained sustainable, reflecting the growth in the economy over the years.

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