Kenya fails to pay salaries of public servants in March

Kenya failed to pay public servants’ March salaries on time, a liquidity strain signal for a government facing unprecedented financial obligations.

The East African nation’s government is expected to make the payments next week, according to David Ndii, President William Ruto’s chief economic adviser. Revenue collection is set to improve and the authorities expect to receive about $200m from a syndicated loan, Ndii said on Monday. A treasury spokesperson said last month that a bank syndication process is at an advanced stage.

Ndii sought to allay fears of a crisis, attributing the squeeze on liquidity to large maturities of domestic debt in March that required the government to pay creditors about 150-billion shillings ($1.1bn) — about double the amount that is usually paid. Additionally, revenue collection will likely improve in April “because you have two corporate income taxes that are paid”, he said, referring to a final payment for the financial year that runs through June, and an instalment for the first quarter.

Economic pain is intensifying for government workers as the nation contends with a high cost of living. Annual inflation was 9.2% in March and has remained above the central bank’s 2.5%7.5% target since June amid rising food and energy prices.

Kenya’s public wage bill was projected to reach 131.9-billion shillings in the three months to December, compared with 123.7-billion shillings a year earlier, according to the state’s Salaries and Remuneration Commission. The number of public service employees increased to 963,200 in the fiscal year through June, from 923,100 in the previous period.

Kenya’s public debt rose 11.1% to 9.15-trillion shillings at the end of December, according to central bank data. Debt-service costs may reach a record 1.67trillion shillings in 2023-24, treasury estimates show.

“It is true we are having challenges in paying salaries,” deputy president Rigathi Gachagua said, adding that the government had not disbursed funds, as required, to county administrations. “What we had collected the last two weeks was sufficient to pay the loans.”