NAIROBI, Kenya – The World Bank is urging the Kenyan government to freeze new public service hires for two years and overhaul payroll systems to curb ballooning wage costs that threaten fiscal stability.
In its latest Public Finance Review for Kenya, the lender says the country’s public wage bill is unsustainable—particularly when county governments are factored in—and warns that inefficiencies in staffing, allowances, and payroll control are draining public resources.
The Bank recommends a temporary hiring freeze in non-priority sectors, combined with automation of routine roles and redeployment of existing workers, especially in national and county bureaucracies.
“This can allow for staff numbers to be increased in service delivery roles in health, education, or better water management in a context of growing climate impacts, enabling service delivery improvements in a fiscally neutral way,” the report says.
The proposal comes as Parliament debates the controversial 2025 Finance Bill and budget estimates ahead of the June budget statement, with the Treasury targeting Ksh.30 billion in additional revenue but avoiding new taxes following last year’s deadly protests over hikes.
Counties Overshooting Wage Ceilings
Kenya’s public service workforce stood at 968,452 as of 2024, with county governments accounting for 22 percent.
Yet only six out of 47 counties met the constitutional wage-bill-to-revenue threshold of 35 percent in the last fiscal year, according to the Salaries and Remuneration Commission.
While the national government is within legal limits, the World Bank warns that the combined public wage bill is fiscally unsustainable.
Bringing it within the required limits could free up resources equivalent to 0.4 percent of GDP, the report estimates.
“The extensive use of manual payrolls, prone to manipulation, and ineffective succession management, delaying the retirement of eligible civil servants, further exacerbate the problem,” it adds.
A proposed unified human resource information system would help manage the hire-to-retire cycle and remove “ghost workers” from the payroll.
Between 2019 and 2023, the government could have saved over Ksh.5.3 billion from eliminating such workers alone, the Bank estimates.
Allowances and Per Diems Under Fire
Beyond salaries, the Bank highlights “incoherent” and “overused” allowance policies that fuel waste and inefficiency.
It says nearly 40 percent of total wage spending on permanent employees and senior officials goes to various allowances, which often serve as de facto salary top-ups.
“These allowances undermine productivity as staff are frequently absent from their duty stations since the system creates incentives to seek per diems,” the report notes.
The World Bank wants the government to halve its Ksh.19.6 billion travel-related budget, standardize Daily Subsistence Allowance (DSA) rates, and regulate the frequency and location of in-country workshops.
In the 2022/23 fiscal year alone, DSAs consumed Ksh.6.2 billion—nearly a third of the total travel budget.
Per diem rates for foreign trips are also under scrutiny.
A civil servant currently receives an average of $513 (Ksh.66,353) per day for travel to the U.S., which the Bank says could be trimmed to $326 (Ksh.42,119) under standardized rates used by some ministries.
Using UNDP benchmarks, the figure would drop to $460 (Ksh.59,498).
Reforms Amid Budget Squeeze
The recommendations come as the Treasury moves to cut the proposed 2025/26 budget by Ksh.130 billion from the initial Ksh.4.3 trillion plan.
The fiscal deficit is projected to shrink to 4.5 percent of GDP from 5.1 percent last year.
While no new taxes are planned, government departments and agencies are under pressure to streamline spending—making the World Bank’s report both timely and politically delicate.
It remains to be seen whether the government will adopt the proposed hiring freeze, especially with pressure mounting to boost employment and improve service delivery in underfunded sectors like health and education.
