The proposal on a hybrid model for financing the six-member bloc’s budget needs some more consultations, ministers in charge of regional affairs have concluded.
This was one of the key decisions made at the end of their week-long meeting at the East African Community (EAC) Headquarters in Arusha, Tanzania.
According to Adan Mohamed, the Chairperson of the EAC Council of Ministers, the funding challenges have dogged the organs and institutions of the bloc
Mohamed who is Kenya's Cabinet Secretary for the Ministry of East African Community and Regional Development added: "As far as the issue of finance is concerned, the ministers of finance have made a recommendation and the recommendation was brought to the Council and that, ultimately, is going to be approved by the Summit in terms of what needs to be adopted or not.”
"But yesterday (Monday), one of the things we drew our conclusion on is that: we need some time for more consultations before the proposal by the finance ministers is taken to the Summit in the not too distant future.”
Officials at the EAC Headquarters are not so sure when the Summit – which was supposed to be held on Tuesday, November 30—the EAC Day on the annual events calendar – will be held. But they noted that it will be held on another date not later than February 2022.
The proposal of a hybrid model that requires each partner state to contribute, equally, 65 per cent towards financing the EAC budget came as Finance Ministers concluded a two-day retreat in Kenya’s port city of Mombasa, on November 16.
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 GDP per capita for the previous five years as assessed by the World Bank.
Finance Ministers had recommended that the Council of Ministers, the policy making Organ of the Community, approves the model as the new financing mechanism for the bloc.
A study was in the recent past done on the required reforms to align the EAC structure, programmes and activities with the financial resources available from partner states in order to ensure sustainability of the Community while addressing the dependency syndrome.
The study identified key priority projects, programmes and activities that can be implemented with available resources now and in the future without slowing the integration momentum as well as identifying constraints with the existing funding structure by partner states and development partners that causes delays and, or non-compliance with disbursements obligations.
After deliberation of the recommendations from the study, Finance Ministers had agreed to adopt a model that is simple in terms of parameters to be used on the assessed contribution component and sensitive to principles of equity, solidarity, equality and the size of the Partner States’ economies.
Once the Council wraps up its consultations and implements, it will be a major breakthrough as regards to finding a solution to the longstanding problem of member states that default on their financial obligations.
For long, internal resources have remained constrained as countries continuously failed to make their obligatory remittances to the EAC Secretariat on time.
Initially, finance ministers had agreed that the proposed hybrid model be reviewed after three years of its implementation.
Earlier, Kenya’s Cabinet Secretary to the National Treasury who is also the Chairperson of the regional Finance Ministers’ working group, Amb. Ukur Yatani, recalled that their meeting in May arrived at a consensus on all recommendations of the study, except one recommendation regarding the proposed hybrid model.
At the time, it is noted, there were divergent views.
Currently, partner states contribute equally - $8 million – to the bloc’s budget as outlined in Article 132 of the EAC Treaty.
The Treaty provides for additional funding from Development Partners and any other sources as may be determined by the Council of Ministers.