In a candid and thought-provoking interview on Citizen TV, National Treasury Cabinet Secretary John Mbadi warned that Kenya is burdened with an extraordinarily expensive government. According to Mbadi, the high costs of running the national administration, particularly through enormous salary payments and hefty debt servicing obligations, are choking the country’s fiscal space and slowing down economic development. This extensive discussion not only highlighted the immediate challenges faced by Kenya but also sparked calls for a broader conversation on the nation’s governance structure and long-term fiscal sustainability.

The Cost of Running a Government in Kenya

During his interview, Mbadi laid out the stark figures behind the government’s expenses. He revealed that the salaries paid at the national government level amount to Sh80 billion per month, translating to approximately Sh960 billion annually. Looking ahead, he cautioned that this figure is set to rise, potentially exceeding Sh1 trillion per year. In addition to these massive wage expenditures, Kenya is also servicing loans amounting to about Sh1.1 trillion each year. With the country’s annual revenue collection estimated at roughly Sh2.5 trillion, the gap between income and expenditure is glaring.

“We have a very expensive government. Today, we are paying Sh80 billion per month at the national government level for salaries. Per year it is Sh960 billion, it’s going to a trillion shillings, and we are collecting Sh2.5 trillion and we are spending on loan repayment about Sh1.1 trillion—so where do you get money for development? That is why sometimes our economy is sluggish,” Mbadi explained.

These figures underscore a critical fiscal dilemma: after meeting wage bills and loan repayments, there is little left in the budget to invest in development projects that could spur growth. This situation is further exacerbated by the fact that a significant portion of Kenya’s development over the years has been propped up by grants from international development partners—support that Mbadi described as “just luck.”

The Structural Challenge: National vs. County Governance

One of the key points Mbadi raised was the structural inefficiency of Kenya’s current governance system. Following the promulgation of the 2010 Constitution, Kenya adopted a devolved system where power is split between the national government and 47 county governments. While the intention behind devolution was to bring governance closer to the people, it has also led to a duplication of administrative functions and a ballooning wage bill across multiple levels of government.

Mbadi noted that the current model, where each county operates as an independent mini-government—with a governor, deputy, full-fledged county assembly, and numerous chief officers—is unsustainable given the fiscal pressures. He contrasted this with the pre-2010 structure of eight provinces, suggesting that a more consolidated approach might better address the financial challenges that the country now faces.

“There must be a conversation. I’ve been a member of the Budget and Appropriations Committee in the National Assembly for 15 years, and I remember during the time of Mutava Musyimi I filed a question to my committee asking for the costing of the government. Former Auditor General Edward Ouko led a team that compiled a very detailed report to Parliament. How I wish we could pick that report again and Kenyans have a conversation on whether we need the kind of government we have today,” Mbadi remarked.

The Fiscal Implications of an Expensive Government

The implications of these high expenditures are far-reaching. With national revenues standing at Sh2.5 trillion, the combined weight of salary payments and loan servicing—totaling over Sh2 trillion—leaves an insufficient fiscal buffer for critical development investments. This imbalance poses several risks:

• Crowding Out Development Expenditure: When a vast portion of public funds is allocated to recurrent expenditures such as salaries and debt repayments, less is available for capital projects, infrastructure development, healthcare, education, and other key growth drivers.
• Debt Sustainability Concerns: Servicing a loan burden of Sh1.1 trillion per year, in an environment of high interest rates, further deepens the fiscal deficit. Persistent deficits may compel the government to borrow even more, creating a vicious cycle of debt accumulation.
• Dependence on External Funding: Mbadi’s comment on relying on development partners’ grants as “just luck” reflects the precarious nature of Kenya’s fiscal stability. Over-reliance on external aid for developmental progress can be unsustainable in the long term, especially as donor priorities evolve.

Historical Context and Policy Debates

The debate over government expenditure and structure in Kenya is not new. Historically, Kenyan policymakers and legislators have grappled with finding the optimal balance between efficient governance and effective decentralization. The report prepared by former Auditor General Edward Ouko—mentioned by Mbadi—remains a seminal document in this regard. During the tenure of Mutava Musyimi and subsequent fiscal reviews, there were persistent calls for a comprehensive re-examination of how government functions are costed and managed.

Critics have argued that the sprawling nature of the devolved government, with 47 county administrations, has led to redundancy, inefficiencies, and an unsustainable fiscal burden. In contrast, proponents of devolution point to the positive impacts of bringing services closer to local communities and the empowerment of regional governance. However, the challenge remains: how can Kenya maintain the benefits of decentralization without overextending its fiscal capacity?

Comparative Analysis: Learning from Other Nations

Kenya is not alone in facing the dual challenge of high government expenditure and the need for structural reform. Many countries with decentralized systems have grappled with similar issues. For instance, some federal countries have implemented reforms to streamline administrative structures and reduce wage bills while maintaining regional autonomy. Looking at models from nations with a successful federal system might offer lessons for Kenya.

One notable example is Germany, where the federal structure is robust, but there is continuous coordination between the federal and state governments to ensure fiscal discipline and avoid duplication. Mechanisms such as fiscal equalization and consolidated budget processes help maintain a balance between central authority and regional autonomy. While Kenya’s context is different, exploring similar models could provide pathways for reform.

The Role of International Institutions and Economic Advisers

International financial institutions such as the International Monetary Fund (IMF) and the World Bank have repeatedly emphasized the importance of fiscal consolidation and structural reforms in emerging economies. Recent IMF assessments of Kenya’s fiscal outlook have warned that without significant reforms to streamline government expenditure, the country’s debt trajectory could become unsustainable. Analysts point to high wage bills and inefficient public spending as major impediments to achieving long-term fiscal stability.

Economic advisers have also stressed that reducing the recurrent expenditure component of the budget—particularly through salary rationalization and the consolidation of administrative functions—could free up much-needed resources for investment in development projects. Such investments are critical for boosting economic growth, improving public services, and ultimately, reducing poverty.

Policy Proposals and the Way Forward

Given the current fiscal pressures, there is a growing chorus among economists, policy makers, and civic leaders for a fundamental rethinking of Kenya’s governance model. Several policy proposals have been floated in recent years, including:

1. Consolidation of Administrative Structures: Revisiting the number of administrative units by potentially reducing the 47 counties to a more manageable number, or implementing shared services across counties, could help curb the ballooning wage bill. This would not only lower recurrent expenditures but also reduce duplication in service delivery.
   
2. Rationalization of the Wage Bill: Implementing a comprehensive review of the public service payroll to identify redundancies and inefficiencies could help trim costs. This might include measures such as performance-based pay, merging of overlapping roles, and better use of technology to improve productivity.
   
3. Enhanced Revenue Mobilization: While expenditure cuts are essential, increasing revenue is equally critical. Strengthening tax administration, broadening the tax base, and curbing leakages can help improve the overall fiscal balance. Recent reforms in Kenya’s tax system have shown promise, but there is still room for improvement.
   
4. Debt Management Reforms: Developing a robust framework for debt management is crucial. This includes strategies for refinancing existing debt at lower interest rates, reducing the reliance on high-cost borrowing, and ensuring that new debt is tied to high-return investment projects.
   
5. Public-Private Partnerships (PPPs): Leveraging PPPs can help mobilize additional resources for infrastructure and development projects. By sharing risks and responsibilities between the government and private sector, Kenya can accelerate its development agenda without overburdening its fiscal resources.
   
6. Strengthening Accountability and Transparency: Ensuring that public funds are used efficiently and transparently can help build trust and support for necessary reforms. Institutionalizing regular audits, enhancing the role of oversight bodies, and promoting participatory budgeting processes are vital steps in this direction.
   

The Broader Economic Context

Kenya’s fiscal challenges must be understood against the backdrop of its broader economic landscape. Over the past decade, Kenya has made significant strides in diversifying its economy, expanding its industrial base, and positioning itself as a regional hub for finance, technology, and manufacturing. However, despite these successes, the country continues to face headwinds such as rising public debt, a high cost of borrowing, and persistent fiscal deficits.

The current budgetary pressures—exacerbated by high government expenditure—pose a risk to the country’s development trajectory. With a large chunk of revenue allocated to recurrent expenditures, there is limited fiscal space to invest in critical areas such as infrastructure, education, and healthcare. These sectors are essential for sustaining economic growth and improving the quality of life for Kenyans.

Moreover, the heavy debt servicing burden, which stands at Sh1.1 trillion annually, further constrains fiscal flexibility. As global interest rates fluctuate and borrowing costs remain high, the risk of a debt spiral increases. This is a concern not just for the national government but also for county governments, which rely on funds transferred from the central treasury. A comprehensive review of the government’s fiscal policies, therefore, becomes imperative to ensure that public spending is aligned with long-term development goals.

Voices Calling for Change

The debate over government spending and structural reform has been gaining traction among various stakeholders in Kenya. Academics, civil society organizations, and opposition leaders have long argued that the current fiscal model is unsustainable. Recent public discussions, media reports, and policy forums have brought renewed focus on the need to re-examine the structure and size of government.

John Mbadi’s remarks have resonated with many who believe that the high cost of governance is a fundamental barrier to economic progress. His call for a national conversation on whether the current form of government is what Kenyans truly want is not just a fiscal issue—it is a question of governance, accountability, and the future direction of the nation.

Advocates for reform argue that a leaner, more efficient government structure could unlock significant resources that could be redirected towards development projects. They point to examples from other countries where public sector reforms have led to improved service delivery, enhanced economic growth, and better overall governance. For Kenya, embracing such reforms could be transformative, helping to reduce the fiscal deficit and creating a more conducive environment for sustainable development.

The Role of International Development Partners

Historically, Kenya’s development has been supported by substantial grants and technical assistance from international development partners. While these funds have played a critical role in propelling economic progress, Mbadi’s remarks underscore that relying on external aid is not a sustainable long-term strategy. As Kenya continues to mature economically, there is a pressing need to build self-sufficiency and reduce dependency on donor funding.

The international community, including organizations such as the World Bank and the IMF, has consistently advocated for fiscal consolidation and structural reforms in Kenya. These institutions have stressed that sustainable development requires not just increased spending on growth-promoting sectors but also a more efficient allocation of public resources. Their recommendations often include measures to rationalize government spending, improve tax collection, and enhance public financial management.

Looking Ahead: A Path Toward Sustainable Governance

The challenges highlighted by John Mbadi present an opportunity for Kenya to reimagine its governance and fiscal framework. The conversation on restructuring government expenditure and streamlining the administrative apparatus is likely to intensify in the coming months. Policy debates, legislative reviews, and public consultations could pave the way for transformative reforms that reshape Kenya’s fiscal future.

Key steps in this direction may include:

• Comprehensive Fiscal Reviews: Conducting detailed studies to identify inefficiencies and areas where expenditure can be curtailed without compromising essential services.
• Public Dialogue and Participation: Encouraging active engagement from citizens, civil society, and experts to gather diverse perspectives on the optimal structure of government.
• Policy Innovation: Experimenting with new models of governance that balance decentralization with fiscal prudence, perhaps by exploring hybrid structures that combine elements of county and provincial systems.
• Strengthening Institutions: Enhancing the capacity of oversight bodies and institutions responsible for fiscal management, ensuring transparency and accountability in public spending.

As Kenya embarks on this critical journey, it must balance the need for fiscal discipline with the imperative to support development and growth. The path forward will undoubtedly be challenging, but with thoughtful reforms and broad-based stakeholder engagement, there is hope that the country can build a leaner, more efficient government that fuels sustainable economic progress.

Conclusion

John Mbadi’s pointed remarks on the high cost of governance in Kenya serve as a wake-up call for policymakers, citizens, and stakeholders alike. With national government salaries consuming nearly Sh1 trillion a year and loan repayments amounting to Sh1.1 trillion, the fiscal constraints are stark—especially when juxtaposed against a revenue collection of about Sh2.5 trillion. This fiscal imbalance leaves little room for the investments that are critical for driving development and ensuring long-term economic stability.

The debate over Kenya’s current governance structure—particularly the challenges arising from devolution into 47 counties—has been ongoing for years. Mbadi’s call for a national conversation on whether the current system is sustainable is both timely and necessary. By re-examining the cost of governance and considering structural reforms, Kenya has the opportunity to redirect resources towards much-needed development projects, enhance fiscal discipline, and ultimately, boost the country’s economic performance.

In the broader context, these challenges are not unique to Kenya. Many countries are grappling with the twin imperatives of managing public expenditure efficiently and investing in growth-enhancing projects. However, the Kenyan case is particularly pressing given the scale of the expenditure and the potential long-term implications for development. The call for reforms—from consolidating administrative units to rationalizing the wage bill—reflects a growing recognition that fiscal sustainability is the cornerstone of any successful development strategy.

As Kenya moves forward, the need for prudent fiscal management, coupled with a willingness to embrace structural reforms, will be key to unlocking a more prosperous future. The voices calling for change—echoed by leaders like John Mbadi—signal a critical juncture in Kenya’s development narrative. With the right policy choices and effective implementation, the country can overcome its fiscal challenges and set a course toward a leaner, more efficient government that prioritizes sustainable growth and development.

In the end, the path to reform will require courage, consensus, and a commitment to long-term change. It is a challenge that Kenya—and indeed, many nations—must confront if it is to secure a resilient and dynamic economic future for its citizens.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

21st March, 2025