The cost of operations and maintenance for public offices under the national government crossed the Sh1 trillion mark for the first time in the financial year that ended June 2024, highlighting the rising burden on taxpayers to keep the government running.
President William Ruto's government spent about Sh1.05 trillion on operation and maintenance expenses such as supplies of goods and services, transportation, utilities, travel, and repairs, provisional data from the National Treasury shows.
The expenditure, in the fiscal year Kenya suffered a considerable Sh280 billion shortfall in ordinary revenue receipts, represents a 21.24 percent jump over Sh866.15 billion in the year ended June 2023.
Analysis of the exchequer data shows that operations and maintenance (O&M) expenses have been amongst the biggest drivers of recurrent expenditures over the years, alongside debt service and pension costs.
The expenses have more than doubled in under a decade (eight years), rising from Sh471.61 billion in the year ended June 2017.
The cost of running public offices has grown by an average of 13.06 percent over eight years through June 2024--more than double the average 6.3 percent rise in inflation.
President Ruto, who pledged to tame the rise in operational expenses when he took power in late 2022, appears to be struggling to keep a tight lid on the costs in his second year in office.
This is despite a relatively good start during the first year in office ended June 2023 when O&M expenses rose at a modest 3.15 percent, the slowest pace outside the pandemic in more than a decade.
Dr Ruto initially targeted expenditures for printing, advertising, travel, communication supplies and services, training, hospitality, furniture and vehicle purchase as well as research and feasibility studies for public offices.
“The Kenyan government [under Dr Ruto] had initially made good progress in tackling the poor public finances. There have been signs of fiscal slippage recently, though, as spending has increased and revenues have underperformed,” Jason Tuvey, deputy chief emerging markets economist at UK-based Capital Economics, said in a recent note on Kenya.
“That spurred the government, in the 2024/25 Budget, to outline a raft of tax increases to get its fiscal consolidation plans back on track” he added.
A raft of new and higher taxes geared at covering the increased spending for the current financial year ending June 2025 were, however, resisted through deadly youth-led protests, forcing Dr Ruto to shelve the plan.
Operational expenses have been the softest target for expenditure cuts this fiscal year after the withdrawal of the Finance Act 2024 left a Sh344 billion hole in the budget.
The cuts have included the removal of budgets for refurbishments and partitioning of government offices, purchase of new vehicles except for security agencies, halving of renovation expenditure, and reduction of budgets for travel and hospitality.
The projected savings are, however, not enough to cover the estimated budget hole, prompting the Treasury to raise the target for borrowing by Sh172.19 billion for the year ending June 2025 to Sh1 trillion.
Analysts have maintained that Kenya has an “expenditure problem and not a tax [raising] a problem”, indicating that the government needs to tame its expenditure further to achieve a balanced budget where borrowing is kept at minimal levels.
International Budget Partnership's Country Manager for Kenya Abraham Rugo has cited supplementary budgets --aimed at covering expenses that were not initially budgeted-- as the main driver of non-debt expenditures.
“Governments are meant to exist and deliver services perpetuity which means that as the size of government grows, recurrent expenditures are likely to increase indefinitely,” Dr Rugo told the Business Daily recently.
“However, this does not mean that there are no wastages or inefficiencies in the public sector that drive a wedge between productivity and compensation” he added.
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