Kenya’s county wage bill doubles

By Stanley Wabomba

Kenya should reduce its budget deficit in coming years increasing spending to finance the much-needed infrastructure upgrades.

The draft 2016/2017 budget policy statement released last week shows a reduction in the fiscal deficit after a period of expanded spending, mainly for infrastructure.

However, Mark Bohlund, an Economist with Bloomberg says the planned fiscal contraction may be undone by county governments, whose wage bills have doubled in the past two years.

The National Treasury is targeting a budget deficit of 9.3 percent of GDP in the next fiscal year.

These efforts according to Mark Bohlund, an Economist with Bloomberg could be hurt by county governments, whose wage bills have doubled in the past two years, with 11,000 employees added in 2015.

In addition, according to the 2016 Economic Survey, county workers also earn 27 percent more than national government employees and 8 percent more than private sector employees. Mark adds: “Elections in August 2017 may make it politically expedient to delay a needed curtailment of county-level spending, which would have repercussions for Kenya’s already elevated public-debt level.”

However, this would only be achieved if the public agencies spend all cash allocated to them in the budget.

But basing on the historical absorption rates, the National Treasury expects the budget deficit to come in at 6.9 percent.

He says: “If realized, this would constitute budget consolidation compared with an estimated 7.9% deficit in the current fiscal year. The deficit is projected to fall to 6.4% and 5.3% in FY2017/18 and FY2018/19, respectively, and below 4% of GDP further out.”

Kenya expects to finance a majority of the 2016/2017 fiscal year deficit from foreign borrowing, mainly from China to finance the second phase of the Mombasa-Malaba standard-gauge railway.

In addition, the government has had plans to float a 150 billion shillings Eurobond. As the country prepares for the 2016/2017 national budget reading, economists are of the opinion that this year’s budget should focus on addressing insecurity, job creation and growing the economy.