Government breaches law by using Sh467.6 billion from borrowed loans for salaries
The revelation underscores the cash flow pressures the government faced leading up to the 2024 tax proposals that triggered countrywide protests.
The government used only Sh350.7 billion out of the Sh818.3 billion it borrowed in the year to June 2024 for development, violating the legal requirement that all borrowed funds be directed to projects.
This means that 57 per cent of the borrowed amount (Sh467.6 billion) was spent on recurrent expenses such as salaries and allowances, contravening the Public Finance Management (PFM) Act, 2012.
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The revelation underscores the cash flow pressures the government faced leading up to the 2024 tax proposals that triggered countrywide protests.
According to the 2025 Budget Policy Statement (BPS), less than half of borrowed funds in the Financial Year 2023-2024 were allocated to development projects.
"In the financial year 2023/24, Sh350.7 billion out of total borrowing of Sh818.3 billion was used for development expenditure purposes," Treasury notes in the BPS.
The law requires that government borrowings fund development projects, but a significant portion was diverted to other uses.
In April 2023, while addressing delayed salaries for public servants and late disbursements to counties, President William Ruto assured the public that borrowed funds would not be used for recurrent expenses.
Promise broken
"We are not going to borrow money to pay salaries," the President said at the time. However, this promise appears to have been broken.
The Treasury's revised figures show that Sh467.6 billion was used for recurrent spending, an increase of Sh52 billion from the Sh415.7 billion disclosed in the 2024 Budget Review and Outlook Paper (BROP).
The total borrowings for FY 2023-2024 have also been revised upwards to Sh818.3 billion from the Sh766.4 billion previously reported.
Despite the breach, the Treasury insists that the government remains committed to ensuring borrowings are used for development purposes.
"The government is committed and continues to adhere to this principle by ensuring that government borrowing is used to finance development expenditure," the Treasury states in the BPS.
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