Rwanda never defaults when it comes to its annual financial commitments to the East African Community (EAC) Secretariat, a senior government official told Sunday Times.

Innocent Safari, the Permanent Secretary in Rwanda’s Ministry of East African Community Affairs, said this following a recent report by The East African newspaper indicated that the five countries defaulted in remitting $30.9 million in budgetary support, leading to rising supplier debts and disruptions of operations.

"We never defaulted. But what is important to note is that normally, partner states normally pay in quarterly installments and we are in the process of paying our last amount very soon,” Safari said on Thursday.

"We are in December now. There was no delay.”

Rwanda’s debt, The East African reported, is $6.3 million while Burundi which is currently weighed down with political instability is the leading defaulter followed by Tanzania, Rwanda, Kenya and Uganda in that order.

Burundi reportedly owes the Secretariat $11.2 million including last year’s arrears of $2.8 million, and Tanzania’s arrears stand at $6.5 million. Kenya owes the EAC $4.2 million while Uganda’s debt is the lowest at $2.7 million.

The real issue: lack of appropriate financing mechanism

The Secretariat’s cash crunch, however, is not the focal problem. There have been instances, in the past, where – for various reasons – partner states' monies do not reach the Secretariat in time.

In September, for example, the Secretariat reportedly experienced a cash crunch but sources there now say things have improved.

Nonetheless, reports that the Secretariat repeatedly goes through such difficulties do not strike a chord as they point to the ‘age old’ dilemma of Partner States taking too long to agree on a new and sustainable financing mechanism for the bloc.

MP Patricia Hajabakiga who leads Rwanda’s representatives in the East African Legislative Assembly (EALA) knows the cash crunch is an old predicament that could be cleared up if the bloc becomes creative as regards resource mobilization.

"This is an old problem. In my personal opinion, the only sustainable solution to the problem is to change the financing mechanism of the EAC,” Hajabakiga told Sunday Times.

For some time now, Partner States have mulled over a novel arrangement that would see each surrendering at least one percent of its revenues from imports to fund the Community’s annual budget so as to, among others, cut unnecessary and risky dependency on donor funds.

An EAC Summit directive in November 2013 tasked the EAC Council of Ministers, the bloc’s policy organ, to present a report on alternative financing mechanisms, including the option of one per cent of imports from outside EAC.

Mid last year, EALA MP Dr James Ndahiro, told Sunday Times that should talks on the matter be successful, the regional bloc would be able to avoid hand-outs from development partners – "an undesirable situation which is not in the EAC alone.”

Continued donor dependency, many in the EAC believe, will dent the bloc’s operations and development agenda.

Ndahiro, an economist by training, saw no other solution. A financing model whereby each country will contribute one percent of its import revenue, he said, was the best option.

"If done, it will exceed the current budget by 150 percent and with this we can finance ourselves,” said Ndahiro who sits on EALA’s Committee on General Purposes.

Member states make equal contributions to the Secretariat.

Last year, sources indicated that imposing a one per cent levy on all imports to the region would generate $310 million, per annum, nearly three times the annual bloc’s budget.

Uganda’s then minister for EAC Affairs, Shem Bageine, admitted before EALA that not all countries are comfortable with the proposed arrangement as some states, he said, feel they have to benefit from revenue collections accrued from their imports.

At the time, he announced that a report on alternative financing was ready. The Council would first forward its recommendations to the Heads of State Summit for consideration and possible approval.

The Summit directed the Council to look into the matter yet up to now the latter seems to be dragging its feet.

Asked about why it is taking too long to find a sustainable solution to a financial hitch that has troubled EAC institutions for so long, Safari noted that "whatever decision we arrive at must be agreed upon by all five partner states.”

"It is taking long but it is something that we must, internally, be careful about so as to come up with an appropriate mechanism for all of us.”

Going by the 2014/15 Budget passed by the Assembly, last year, out of the total budget of $124 million, member states contributed $41.9 million, while $73.2 million is coming from donors. 

editorial@newtimes.co.rw