National Treasury Cabinet Secretary John Mbadi has declared Kenya's public sector wage bill a major fiscal risk, revealing that monthly salary expenditures have surged to Sh80 billion, amounting to an annual total of nearly Sh960 billion. Speaking before the National Assembly's Education Committee on Tuesday, November 4, 2025, Mbadi warned that this level of spending is unsustainable and directly threatens the nation's economic stability by squeezing funds meant for development projects.

The Treasury chief highlighted a dramatic escalation in the portion of national revenue consumed by public salaries. "In 2013, only about 16% of ordinary revenue went to salaries. Today, it exceeds 40%," Mbadi stated, underscoring the severity of the situation. This sharp increase from Sh75 billion per month in January 2025 reflects growing pressure from various sectors, including the recent onboarding of Junior Secondary School teachers and enhanced pay for disciplined forces and university lecturers. The CS cautioned that if this trajectory continues, the government will be forced to sacrifice capital expenditure, which is essential for economic growth.

A Looming Crisis: Crowding Out Development

The core of the problem, as outlined by both the Treasury and independent bodies, is the direct trade-off between recurrent expenditure (primarily salaries) and development spending. With nearly Sh1 trillion annually committed to salaries and an additional Sh1.1 trillion for loan repayments against a total revenue collection of about Sh2.5 trillion, the fiscal space for infrastructure, healthcare, and education projects is dangerously narrow. "That is why sometimes our economy is sluggish," Mbadi admitted in a statement in March 2025, noting that the country relies on grants from development partners to sustain its development agenda.

This sentiment is echoed by the Salaries and Remuneration Commission (SRC), which has repeatedly warned that the high wage bill constrains the government's ability to fund its own priorities. The Public Finance Management (PFM) Act stipulates a ceiling for the wage bill at 35% of total revenue, a threshold that both national and county governments have consistently breached. According to a September 2025 report from the SRC, the wage bill-to-revenue ratio for counties peaked at a staggering 54.7% in the third quarter of the 2024/25 fiscal year. Similarly, the Controller of Budget, Margaret Nyakang'o, has flagged numerous counties for overspending on employee compensation, with some dedicating as much as 70% of their revenue to salaries.

The Devolution Dilemma and a Bloated Workforce

The expansion of the public sector workforce, which surpassed one million employees in 2024, is a primary driver of the escalating wage bill. The Teachers Service Commission (TSC) remains the largest single employer, having added over 20,000 staff in the 2024/25 fiscal year alone. CS Mbadi has also pointed to the structure of devolved government as a significant cost factor, describing the 47 county governments, each with a full retinue of officials, as expensive and contributing to the financial strain.

The Controller of Budget's reports have revealed systemic issues at the county level, including the use of manual payrolls which processed Sh10.7 billion in compensation, and even "fraudulent budgeting" where some counties deliberately underreport salary expenses to create an illusion of compliance. These practices exacerbate the fiscal pressure and undermine transparency.

Pathways to Sustainability

In response to the crisis, the government and the SRC are pursuing a multi-pronged strategy aimed at reining in the wage bill. A key initiative, announced by CS Mbadi during his budget speech in June 2025, is the full implementation of a unified human resource management system by July 2025. This system is intended to enhance efficiency and eliminate 'ghost workers' from public payrolls.

Furthermore, the SRC is leading a push to link civil service pay to productivity and performance. This involves setting clear performance targets for employees in all ministries, departments, and agencies, with mechanisms for disciplinary action for non-performance. The SRC has also launched an ambitious Sh9.67 billion five-year strategic plan (2025/26 - 2029/30) with the goal of reducing the wage bill to the statutory 35% of revenue by 2028. This plan includes reviewing and rationalizing staff establishments and streamlining public service allowances.

While acknowledging the legitimate demands for better remuneration from public servants like university lecturers, CS Mbadi stressed the need for a balanced approach. "We must be alive to the challenges that we are facing... we must agree on a formula that would not put excessive strain on us," he urged. The Treasury's warning serves as a critical call to action for all arms of government to enforce fiscal discipline and prioritize sustainable economic growth over a recurrent expenditure model that threatens to derail Kenya's development aspirations.