Apart for teachers and members of the disciplined services, hundreds of thousands of government and parastatal employees were still without pay as of yesterday.
With thousands of government employees suffering unprecedented delays in payment of their salaries, National Treasury and Economic Planning Cabinet Secretary Njuguna Ndung’u warned of tough times ahead, saying, the government is in a “financial fix” with nowhere to get more funds.
Lifting the lid on the cash crunch, Prof Ndung’u said the national government is facing financial constraints as it is caught between underperforming revenues and limited access to finance due to narrowing borrowing headroom.
Stopping short of saying the government is “broke”, he said the situation has seen several government programmes stall, including disbursement to the counties and investment projects with most of the funds going towards debt financing.
“The national government is caught between two extremes; high level of debt financing and financing constraints due to limited access to finance in the domestic and international financial market,” said Prof Ndung’u.
David Ndii, who is President William Ruto’s economic adviser said the government is considering retrenching public servants to cut the wage bill which is consuming over 60 per cent of total revenues collected.
This means teachers and civil servants who have hit age fifty years and above will be retired early to save the government from spending too much on salaries.
Whether the teachers and civil servants will be paid their retirement package early its still a puzzle.
On average, Treasury requires about Sh50 billion monthly for civil servants’ salaries and another Sh8 billion for payment of pensions.
Several staff working in ministries, departments and agencies have been affected by the delays with most going for Easter Holidays without pay.
Although National Assembly Majority Leader Kimani Ichung’wa last Thursday claimed MPs had started receiving their salaries as of that afternoon, some lawmakers have denied this. Usually, the lawmakers receive their salaries between the 26th and 30th of every month.
“I have not seen anything in my bank account, maybe because I don’t have an account with Cooperative Bank,” said Vihiga Senator Godfrey Osotsi yesterday.
Mumias East MP Peter Salasya said it is the first time since independence in 1963, that the country is experiencing a salary crisis in the public sector.
Teachers And Civil Servants Set For Early Retirement.
“Not even during [former President Daniel arap] Moi’s time did we ever experience this. It also didn’t happen during the Covid-19 pandemic when the global economy received its worst beating in the 21st Century,” he said.
The salary delay has also hit the Kenya Broadcasting Corporation (KBC) with staff still waiting for March salaries.
The crisis has been a long time coming, with reports indicating that, since the beginning of the year, civil servants, including parliamentarians and their staff, have been receiving their pay after the 30th day.
“We always receive our salaries on the 27th of every month but until today I have not seen anything,” said a KBC staff member. “Even in December where we are always paid on the 15th, we were paid between 28 and 29th.”
The worker added that even news anchors at the State broadcaster, who are often paid “wardrobe allowance” (to buy clothes) in January and June every year are yet to get the cash.
Last week, KBC acting Managing Director Samuel Maina, in an internal memo to staff, laid bare the situation.
“(The) management regrets to inform you that we are unable to pay March 2023 salaries before Easter holidays due to unavoidable circumstances. We are working round the clock … to ensure that salaries are paid as soon as possible,” said Mr Maina.
At the Independent Electoral and Boundaries Commission (IEBC), chief executive officer Marjan Hussein Marjan told staff they are experiencing delays in processing and disbursement of March salaries with Treasury failing to give the agency a definite date when the money will be released even after requesting for it on March 23.
While appearing before MPs last week, Mr Marjan said IEBC is in dire need of funding to pay its suppliers for the 2022 elections as well as prepare for future constitutional and statutory activities.
Deputy Commission Secretary Obadiah Keitany added that they had initiated payments to some suppliers for the 2022 elections and by-elections but Treasury is yet to release funds.
IEBC officials had been summoned by the MPS to respond to questions on the delay of payments to service providers and election officials for goods and services rendered during the conduct of 2022 elections and by-elections.
While appearing before the Senate County Public Investment and Special Funds Committee late last month, National Treasury Principal Secretary Dr Chris Kiptoo said the government is facing a financial crisis with the Kenya Revenue Authority having missed its latest revenue target by a whopping Sh67 billion.
He said this has led to Treasury struggling to raise funds for disbursement to counties and even to ministries, departments and agencies (MDAs) with county governments owed Sh92.5 billion in delayed January, February and March equitable revenue share remittances and Sh204 billion to MDAs.
He said MDAs are awaiting payment of recurrent expenditures of Sh96.5 billion, development funds of Sh55 billion and pensions amounting to Sh53 billion.
The PS pointed out that the current cash crunch cannot allow Exchequer to settle outstanding debts. He explained that Treasury always prioritises public debt repayment as well as statutory payments such as pensions, which form the first charge on the Consolidated Fund taking at least 65 per cent of revenue raised by the national government. Dr Kiptoo told the committee that, for instance, the Treasury spent Sh150 billion to repay public debt in March alone.
The government collected Sh1.83 trillion between July 1, 2022 and February 28, 2023. Out of this, Sh727 billion (40 per cent) was used on recurrent expenditure and Sh694 billion (38 per cent) on public debt.
Between July and December 2022, the government spent Sh526 billion to pay domestic and external creditors, a massive 32.8 per cent or Sh130 billion rise from the Sh396 billion in a similar period the previous year, new data by the Controller of Budget (CoB) shows. This was from the Sh952.6 billion collected by KRA during the period under review.
The PS, however, added that they are working hard to raise revenues through tax administration and tax compliance, revealing the Treasury will next month “get good amount of money from the World Bank.”
“We are not sitting pretty but we are working round the clock and we see a possibility that come April and May we will be in a better position,” said Mr Kiptoo.
County government staff have been worst hit by the cash crunch. Thousands of workers in at least 20 counties reported having gone without salaries for two months while others yet to pay March salaries.
Tharaka-Nithi, Kirinyaga, Nyandarua, Marsabit, Murang’a, Laikipia, Kakamega, Bungoma, Busia, Vihiga, Nyamira, Kisii and Kisumu Counties are some of the worst affected, with early childhood development and education teachers and health workers yet to receive their pay for February and March.
Dr. David Ndii, the chairman of the Presidential Council of Economic Advisors, defended the government while blaming the financial problem on a number of loans with billion-dollar maturities and a slow growth in revenue.
After the public debt passed the Sh9 trillion threshold in December, Kenya remains at high risk of debt distress. The government plans to borrow Sh720.1 billion in the upcoming fiscal year, which could push the public debt to over Sh10 trillion by June 2024.