The long-awaited sustainable financing mechanism for the East African Community (EAC) has become a reality after the Summit of the EAC Heads of State adopted a relevant funding plan.
According to the commuqué issued by the Summit on November 24, it considered the progress report on the sustainable financing of EAC and agreed on a 65 per cent (equal contribution) and 35 per cent (assessed contributions) financing formulae.
This is one of the outcomes of the 23rdOrdinary Summit of the EAC Heads of State, which took place in Arusha, Tanzania, on November 24.
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On November 17, 2021, the EAC Secretariat announced that the East African Community Sectoral Council on Finance and Economic Affairs (SCFEA) agreed on a Hybrid Model of financing the EAC budget, after holding a two-day retreat in Mombasa, Kenya from – November 15 to 16 of the same year.
The Sectoral Council further recommended to the EAC Council of Ministers, the policy-making Organ of the Community, to approve the model as the new financing mechanism for the EAC.
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The new model requires EAC Partner States to contribute equally 65 per cent of the budget, while the remaining 35 per cent of the total budget will be contributed based on the assessment of Partner States’ average nominal gross domestic product (GDP) per capita for the previous five years as assessed by the World Bank.
The development follows concerns over the financing for EAC which has been inadequate.
Lawmakers at the East African Legislative Assembly (EALA) – the legislative organ of the regional bloc – had consistently warned that insufficient funding for it was threatening to hinder the achievement of its mission for widening and deepening economic, political, social, and cultural integration.
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This, they argued, was the case because the bloc was expanding with the admission of new member countries, but the budget was not increasing accordingly.
And, even the limited financing the Community was getting largely depended on donor funding, while some Partner States were delaying paying due contributions, they exposed.
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For instance, of the more than $103 million EAC budget for the 2023/24 fiscal year, about $59 million (57 per cent) would come from EAC Partner States or other internal revenues, while the remaining $44.8 million (43 per cent) would be sourced from Development Partners.
Meanwhile, the Summit further directed the EAC council of ministers to pursue strategic spending rationalisation measures, institutional strengthening, and strict sanctions for the defaulting Partner States [those that do not remit due contributions needed to finance the Community] and report to the 24th ordinary meeting of the Summit.
With the admission of Somalia to the EAC as its newest member on November 24, 2023, the regional intergovernmental organisation now counts eight Partner States. Those that preceded Somalia as its members are Uganda, Kenya, Tanzania, Burundi, Rwanda, South Sudan, and the Democratic Republic of the Congo (DRC).