The National Treasury failed to release Sh23.78 billion for pension payments in the year ending June 2024 amid a cash crunch, new data shows, dealing a blow to more than 250,000 retirees and violating a fiscal requirement to treat the funds as a first charge in the budget.
At least 259,222 retirees and 83,615 dependents were affected by the delays attributed to “liquidity challenges”, the Treasury reveals in submissions before parliament.
“The amount of Sh23.78 billion relates to carryover from the financial year 2023/24 to the first supplementary estimates for the financial year 2024/25. This was the exchequer request to pay pension claims processed during the period but was not funded during the period due to liquidity challenges,” Treasury notes.
In a report by Parliament’s Public Debt and Privatization committee, the Treasury last month submitted that the unpaid pensions, which had been budgeted for the 2023/24 fiscal year, had to be carried over to the current fiscal year.
The committee noted that the Sh23.78 billion carryovers saw the Consolidated Fund Services (CFS) budget for the year to June 2025 rise from Sh2.06 billion to Sh2.08 billion.
According to the Treasury, a Sh21.22 billion lump sum due to retirees was not paid in the year ending June 2024 due to liquidity challenges, as the government also failed to send Sh2.56 billion contributions to the public service superannuation scheme (PSSS).
“The register of retirees and dependents is in the July 2024 monthly payroll. This comprises 259,222 principal pensioners drawing an amount of Sh5.521 billion and 83,615 dependents drawing Sh875.19 million,” Treasury says.
In the year starting July 2023, the government budgeted Sh189 billion for pensions and gratuities.
The government allocated Sh82.9 billion to ordinary pensions, Sh77.5 billion to commuted pensions and gratuities, Sh24.46 billion for contributions to the PSSS, and Sh134.1 million for other pension schemes.
According to the latest Controller of Budget (COB) report, by the end of March 2024 (the first nine months of the 2023/24 fiscal year), the Treasury had only funded Sh101 billion to cater for pensions.
“Total payments towards Pensions and Gratuities in the first nine months of FY 2023/24 amounted to Sh129.21 billion, representing 68 percent of the gross estimates, compared to Sh112.64 billion (65 percent) recorded in the financial year 2022/23,” the COB stated in March.
“Additionally, there has been underfunding from the Exchequer, as evidenced by the funding of Sh101.03 billion compared to the reported expenditure of Sh129.21 billion,” the COB added.
The COB report noted that by the end of March, exchequer funding towards ordinary pensions totaled Sh48.2 billion out of the Sh60.8 billion spending that was reported, while Treasury funded Sh33.6 billion out of the Sh45 billion reported spending on commuted pensions.
Treasury funding to contributions on the PSSS by the end of March totaled Sh19.2 billion out of the Sh24.2 billion reported spending during the nine months, the COB noted.
The COB report partly attributed the negative impact on funding of pensions and gratuities to a downtime of the Pensions Information System.
Treasury, in the report to the debt and privatization committee last month, noted that in the current fiscal year, 13,403 civil servants are scheduled to retire, which will add more pension burden on the government, at a time it has already started breaching legal requirements to treat the vote as a first charge in the budget.
“A register of projected 13,403 civil servants set to retire during the financial year 2024/25 to be paid lumpsum and monthly pension. A total of 1,500 officers of the Defence Forces are estimated to retire in FY 2024/25,” Treasury said.
