Navigating Kenya’s Public Sector Wage Bill: A Balancing Act for Economic Sustainability and effective Public Service Delivery
By Benson Kimani
In the ever-evolving landscape of Kenya’s economic policies, a recent announcement by the National Treasury to increase the recurrent budget for the 2023/2024 fiscal year by Kes 162 billion sparked a heated debate on the sustainability and appropriateness of the country’s public sector wage bill. The bulk of this budget is earmarked for operations and salaries, prompting calls for a reassessment of the public sector’s size and structure to reallocate resources for development. However, a closer look at Kenya’s public sector wage bill in comparison to other nations with similar economic development reveals a more nuanced perspective.
In 2020, the World Bank reported that Kenya’s public sector wage bill accounted for 7.6% of the GDP, a figure lower than that of many comparable countries such as Ghana, Uganda, and Rwanda. While this statistic provides a snapshot of the financial commitment to public sector salaries, it is crucial to acknowledge the variations in each nation’s public sector size, structure, cost of living, and labor market dynamics. Even so, Kenya’s public sector wage bill remains lower than that of other middle-income nations, underlining the need for a clearer understanding of the distinctive characteristics of each country.
Despite the Kenya Revenue Authority surpassing its tax collection goals in the 2022/2023 financial year, the nation finds itself grappling with high debt levels and a depreciating currency prompting concerns about the sustainability of public finances. The government’s ambitious Bottom-Up Economic Transformation Agenda (BETA) aims to increase revenue collection and reduce the deficit as means to addressing the debt situation. However, these efforts face challenges, as highlighted by the National Treasury Cabinet Secretary’s warning about potential delays in public servant salary payments due to poor revenue collection and limited borrowing options.
The transformation in Kenya’s governance structure after the 2010 constitution ushered in a devolved system of government, expanding the arms of government, introducing the senate, and establishing numerous constitutional commissions. While criticized for contributing to an exponential expansion of the wage bill, the new constitution also brought about accountability measures, such as the Public Sector Superannuation Scheme (PSSS), a self-contributory pension scheme operationalized in 2021, relieving the exchequer of sole responsibility for public sector retirement benefits.
Over the past seven years, Kenya’s public sector wage bill has exhibited steady growth, with a significant portion allocated to Ministries, Teachers Service Commission, Parastatal Bodies, Corporations Controlled by the Government, and County Governments. Despite public discontent, a comparative analysis with other nations reveals that Kenya’s public sector wage bill as a percentage of GDP (7.6%) is lower than many countries, including Zimbabwe, South Africa, India, Ghana, and Uganda. The OECD average for public sector wage bills as a percentage of GDP was 7.71% in 2020, indicating that Kenya is not an outlier in this regard.
A key factor contributing to Kenya’s lower public sector wage bill is the relatively modest wages for government employees. According to the World Bank, the average government wage in Kenya is approximately $190 per month, significantly lower than that of other developing nations. Additionally, the government’s emphasis on fiscal responsibility has played a pivotal role in keeping the wage bill in check. While concerns persist about the impact of low wages on the quality of public services, it is crucial to note that comparisons between countries must be made cautiously. Variations in public sector size, structure, labor market conditions, and economic development can significantly influence the appropriate level of the public sector wage bill.
The structure of the public wage bill also reveals that the basic education subsector sector categorized as a core poverty intervention, accounts for the largest proportion of public wages. Of concern should be the disproportionate contribution of Parastatal bodies and State-Owned Enterprises which denies improvement of wages in the mainstream Government Ministries. Again, the Devolution System that has faced sustained attacks is within agreeable limits considering the 14 constitutional functions it is expected to deliver as well as the large workforce it supports. Therefore, the continuous need for objective analytics underscores the importance of ensuring that public services are adequately staffed and resourced, even as the government strives to maintain fiscal prudence.
In conclusion, Kenya’s public sector wage bill remains a subject of intense debate, with arguments both for and against its current level. The government’s commitment to fiscal responsibility, coupled with relatively modest wages, has kept the wage bill lower than that of many comparable nations. As the country navigates its economic landscape, continued vigilance and strategic decision-making will be essential to strike a balance between fiscal prudence and the provision of quality public services.
About the author
Benson Kimani is a Sustainable Development Specialist at UNDP Kenya.
The views expressed in this post are those of the author and in no way reflect those of UNDP.