The National Treasury has acknowledged difficulties in meeting its pension obligations for civil servants.

Margaret Nyakang'o, the Controller of Budget, revealed that the government skipped remitting pension contributions to the Public Service Superannuation Scheme (PSSS) for the first half of the 2023/24 financial year ending December 2023.

This disclosure comes amidst a wider cash crunch affecting the Kenyan government.

The underperformance of revenue collection, coupled with rising debt repayment obligations, particularly external debt inflated by a weakening shilling, has created a tight fiscal situation.

Nyakang'o, informed the National Assembly's Budget and Appropriation Committee (BAC) that the government only managed to settle outstanding contributions of Sh4.59 billion owed between May and June 2023.

“The government of Kenya’s contribution remitted to the PSSS had six-month contribution arrears, as the Sh4.59 billion remitted to PSSS was payment for May and June 2023,” Nyakang’o stated during her presentation.

The PSSS scheme was introduced in 2021 to address the government's mounting pension burden.

Contributions are staggered, increasing from 2 per cent of an employee's gross pay in 2021 to 7.5 per cent in 2023.

The government contributes an additional 15 per cent on the employee's behalf.

The scheme boasts over 403,000 members and a fund value exceeding Sh80 billion as of July 2023.

However, the cash crunch has also impacted pension payments to retirees.

Nyakang'o highlighted that the government reported spending Sh82.3 billion on pensions while only disbursing Sh59.01 billion.

This falls significantly short of the Sh189.089 billion budgeted for pensions and gratuities in the current fiscal year.

"The budget implementation of pensions and gratuities has been impacted by the downtime of the Pension Information System," Nyakang'o noted.

The Controller of Budget has recommended the timely allocation of funds for pensions and gratuities, alongside resolving outstanding government contributions to the PSSS.

Kenya's economic situation is further strained by underperformance in tax collection by the Kenya Revenue Authority (KRA).

As of February 2024, only Sh1.374 trillion has been collected, representing 55 per cent of the Sh2.495 trillion target for the entire financial year.

This shortfall, coupled with a weak shilling inflating external debt repayments, creates a challenging scenario for the government to meet its financial commitments.