David Ndii, the economic adviser to the Kenyan President, has finally given clarity on why the government is struggling to pay salaries.
In a Twitter conversation on Saturday, Ndii addressed mounting public concerns regarding the unprecedented delays in payment of civil servant salaries.
He dismissed concerns over the issue, saying that the government's priority is paying debts and maintaining political stability.
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When asked about the reason for the government's financial difficulties, Ndii pointed out that debt service is consuming more than 60% of the government's revenue.
He added that liquidity crunches are inevitable when maturities bunch up, revenue falls short, or markets shift, and the government must choose between paying salaries and servicing public debt.
“Debt service is consuming 60 per cent plus of revenue. Liquidity crunches come with territory,” he wrote.
Ndii clarified that foreign debts are not the problem but rather weekly maturities of domestic debt held by banks and pension funds, which account for 80% of debt service.
He suggested that the government could choose between a haircut on bank deposits or delayed payments if it wants to address the situation.
“I am talking about weekly maturities of domestic debt held by your banks and pension funds (80% of debt service) which would you rather, a hair cut on your bank deposits or a delayed payments?” he questioned.
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According to Ndii, the government has to decide between paying salaries or defaulting. He added that retrenching public servants to reduce the wage bill is also an option.
Ndii emphasized that the government's first obligation is survival and political stability, which is why it needs to spend more on political stability when there are more dynasties fomenting destabilization.
"The first obligation of government is survival and political stability. The more dynasties forment destabilization the more we will have to spend on political stability," he wrote.
Ndii further explained that the government can opt for a handshake to ensure political stability, but that would come at a cost.
"If push comes to shove handshake is always an option. How much you think that will cost?” he said.
Ndii's remarks came shortly after reports emerged that thousands of Kenyan public servants, including those working for the county government, MPs, staff of the Independent Electoral and Boundaries Commission (IEBC), and employees of the Kenya Broadcasting Corporation (KBC), had not received their salaries for the month of March, as the government struggled to meet its financial obligations.