The cost of running the national government has increased faster than tax revenues in the current financial year, going against President William Ruto’s pledge to ease the burden on taxpayers by presiding over a cost-effective administration.
The Ruto government spent Sh905.78 billion on administration, operation and maintenance of offices, as well as salaries and wages, over nine months to March 2024, according to the latest Treasury data.
The recurrent expenditure, excluding debt repayment charges, represents a growth of 11.18 percent from Sh814.71 billion during the similar period of the previous year, which partly included election financing general elections of 2022.
The growth outpaced that of tax revenue, which increased by 10.17 percent during the same period to Sh1.54 trillion, according to data which reveals the inflows and outflows of the government’s main account.
Analysts say the speed at which the cost of running government is rising indicates increasing waste in the use of taxpayers’ money amid stagnant or falling productivity levels in the public sector.
“Governments are meant to exist and provide services in perpetuity, meaning that as the size of government increases, recurring spending is likely to increase indefinitely. However, this does not mean that there is no waste or inefficiency in the public sector which drives a gap between productivity and remuneration (salaries),” says Dr Abraham Rugo, National Director of the International Budget Partnership for Kenya.
The double-digit growth in national government operating costs has occurred despite Dr Ruto’s pledge to maintain tight control over administrative and maintenance costs and increase tax revenues by increasing historically low compliance levels among businesses and individuals.
The president pledged, upon coming to power in September 2022, to implement a series of spending savings to ease the burden of financing government operations and administration.
The cost-cutting measures are expected to save up to Sh300 billion in the 2022-23 financial year, his first in office.
Expenditure, however, continued to rise, with the Treasury attributing the rising costs to the Sh279.26 billion in non-debt payments it inherited from the Uhuru Kenyatta administration, which were either carried over from the closed financial year in June 2022, or unbudgeted like the Sh20 billion Hustler Fund. Recurring expenses, excluding debt servicing costs, for the first nine months of the current fiscal year increased at a rate nearly double the rate of inflation, which averaged 6.7 percent.
Central Bank of Kenya Governor Kamau Thugge said earlier this year that the government had no more room to cut spending. This means that the Ruto administration’s plan to ensure Kenya “lives within its means”, or what is technically called fiscal consolidation, relies largely on raising taxes.
“I know, sometimes we think there is a lot to cut in spending, but you will be surprised to learn… that there is very little room for drastic spending cuts, and we don’t want to not cut development spending,” Dr. Thugge said last July, the first month of the current fiscal year. “So it’s really, really important that we raise revenue in order to reduce borrowing and stabilize our debt going forward.”
Dr Rugo, however, believes that a successful restructuring of parastatals could be “a starting point” to reduce the increase in non-debt recurrent expenditure. “A big concern that also emerged at the wages conference (a fortnight ago) is that we are not investing optimally in wages. Productivity is therefore a key area to focus on,” he said.
The growing trend of non-debt recurring costs persisted despite a directive from civil service chief Felix Koskei to accountants to stop reimbursing expenses incurred on trips taken for benchmarking and study visits, training and initiatives related capacity building, research, academic meetings and symposia organized by government officials.
Other spending targeted by the new austerity attempt includes general participation conferences and meetings, side events and exhibitions, and committee and association meetings and events.
“Public institutions wishing to travel and participate in any of the pipeline events in the above categories are required to request virtual participation where available and, alternatively, engage the Ministry of Foreign Affairs and Diaspora to ensure the on-site participation of diplomatic officials. the reference country,” Koskei said in the note.
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