Kenyan development ‘could suffer’ with overspends on staffing

17 Aug 18

Counties in Kenya have to make some “critical decisions” to ensure that their wage bills do not take too much money away from development projects, public finance professionals have warned.

Kenya’s 47 county governments spent just 17% of their budgets on development during the first nine months of the 2017/18 financial year, almost 20% less than the same period a year before, data from the Controller of Budget revealed.

During the same period, counties spending on salaries increased by 18.2% to 108.04bn shillings, or the equivalent of 58.8% of the expenditure.

The Public Financial Management Act of 2012 sets out that the development expenditure should be at least 30% while the staff bill should not exceed 35% of total revenue.

James Muraguri, chief executive officer at the Institute of Public Finance Kenya, told PF International that counties need to achieve “an optimal balance between emoluments [salaries and other staff benefits] and development”.

He added that counties will need to make “critical decisions” to cut back on the staff spending, including considering redundancies and offers for early retirement.

Andrew Kubo Mlawasi, principal budget officer at Taita Taveta County Assembly, said that as a lot of development projects, including hospitals and schools, have been completed, counties need to hire more staff to run these, which brings up the staff expenditure.

He said: “The impact [of this] can be said to be both a blessing and a curse to the people in the counties since, at the end of the day, there is employment on one hand but this is now affecting the development in the long run in terms of resource allocation.”

In the initial planning of some of these projects, staff salaries were not accounted for and the budget costs only covered the infrastructure, he added.

Because of the lack of development spending, a lot of development projects have also stalled. Mlawasi said: “This means the hospitals that were under refurbishment will have to stop, the roads that were being constructed had to stop, drilling of a borehole will have to stop, etc.”

The report by the CoB, published at the end of July, highlighted that the decline in development spending was a result of the increased spending on salaries as well as delays in disbursements by the national Treasury, which slowed down the progress of procurement.

The report said: “The office notes that continued increase in the wage bill is unsustainable and will reduce spending on development activities.

“County governments should therefore ensure that expenditure on personnel [payments] is contained at sustainable levels in compliance with regulations.”

Chrispine Odour, programme officer at the Institute of Economic Affairs, a Kenyan think-tank, told PF International that investing in development at a local level is important to improve access to services.

Muraguri also said that by having well maintained roads, counties are able to attract more investors, which can help raise more revenue.

The CoB report covers the 47 counties budget implementation during the period from July 2017 to March 2018.
Approved budgets for the county governments for the financial year amount to 413.63bn shillings, including 146.65bn for development expenditure (35.5%).
In total, the counties spent just 25.98bn on development, which represents just over 17% of the allocated annual budget.
This is a drop of 20% from the 37.9% recorded in the same period of the financial year 2016/17, when development spending made up 62.74bn shillings.

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