Mbadi flags Sh80b monthly wage bill, warns it threatens economy

National Treasury Cabinet Secretary John Mbadi has warned that the country’s growing wage bill poses a major fiscal risk, urging restraint even as pressure mounts to raise salaries for university staff.

Appearing before the National Assembly’s Education Committee, Mbadi revealed that the government’s monthly wage bill has surged from Sh75 billion in January to about Sh80 billion, translating to nearly Sh960 billion annually.

“In 2013, only about 16 per cent of ordinary revenue went to salaries. Today, it exceeds 40 per cent, a level that is simply unsustainable,” Mbadi said.

He cautioned that despite signs of economic recovery and improving macroeconomic indicators, the country must remain vigilant to avoid backsliding into financial distress.

“The country almost defaulted on a loan repayment last year. Had that happened, we would be discussing how to sustain our workforce, not implementing new CBAs,” he told MPs.

Mbadi acknowledged that lecturers and university staff deserve better pay but insisted that the government must balance competing priorities to preserve fiscal stability.

“Beyond the wage bill, we risk crowding out capital spending. If development budgets are squeezed, the economy won’t grow, and in future, even salaries will be at risk,” he warned.

He urged unions to accept phased payments of their dues, citing limited fiscal space. Treasury, he said, recognises an outstanding Sh7.76 billion owed to university employees under the 2017–2021 Collective Bargaining Agreement (CBA).

Mbadi rejected claims that the government was treating university staff unfairly, saying pay adjustments across the public sector have been guided by the principle of equity. “We treat all public servants equally. The contribution of higher education cannot be underrated, I respect university staff; they were my longest employer after Parliament,” he said.

Tracing the history of the university pay dispute, Mbadi explained that the Inter-Public Universities Council Consultative Forum (IPUCCF) jointly with the University Academic Staff Union (UASU) and Kenya University Staff Union (KUSU) signed the CBA in 2019.

The Salaries and Remuneration Commission (SRC) initially recommended Sh8.8 billion to fund the deal. However, the unions went to court, arguing the amount was insufficient since it excluded annual increments and pension obligations.

In January 2021, the Employment and Labour Relations Court ruled in favour of the unions, pegging the total cost at Sh16.57 billion, including pension liabilities. The government appealed the ruling but lost at the Court of Appeal in March 2025.

Following the court decision, the State Department for Higher Education, in collaboration with SRC, IPUCCF, and universities, verified the implementation of the CBA. The review confirmed that Sh8.8 billion had already been disbursed, leaving a balance of Sh7.76 billion.

Mbadi told MPs that the Treasury has approved a plan to settle the outstanding amount in phases, Sh2.16 billion in the 2025/26 financial year, Sh2.8 billion in 2026/27 and another Sh2.8 billion in 2027/28.

He added that Treasury officials had reviewed and cleared the plan’s impact on the fiscal framework before granting approval. “I was in Angola when I gave online approval after my team confirmed its viability. Unfortunately, I was later informed the offer had been rejected,” Mbadi said. After further consultations, the government has now committed to pay the balance in two equal installments, 50 per cent in the 2025/26 financial year and the remaining 50 per cent in 2026/27.