Security, debt and infrastructure dominate budget of regional states

Four of East Africa’s five economies, Rwanda, Uganda, Tanzania and Kenya unveiled ambitious expenditure plans for Financial Year 2015/16, with security, debt repayment and infrastructure dominating the region’s sector allocations. The new financial year starts July 1. Rwanda’s Rwf1.768 trillion Budget will, according to Finance and Economic Planning minister Claver Gatete, prioritise ‘infrastructure development for social and economic transformation.’ “Infrastructure will take the lion’s share of the 2015/16 Budget with an estimated Rwf298.1 billion,” Gatete told Parliament yesterday. The money will reportedly be spent on rehabilitation of hydro power plants, development of peat power plant, electricity access rollout program, construction and development of industrial parks and access to clean water in Kigali and other areas with low water access rates, among others. Kenya, the region’s largest economy, will have Ksh2.1 trillion to spend, Tanzania Tsh22.4 trillion, while Uganda will spend Ush23.9 trillion between July 2015 and June 2016. Kenya shifts focus to security At least 30 per cent of Kenya’s Ksh2.1 trillion (about Rwf15 trillion) Budget will be spent on security, understandably so after experiencing a troubled 2014/15 financial year that was rocked by deadly terrorist attacks – which hurt the country’s tourism and investment outlook. Economists say the heavy spending on security is a clear signal that President Uhuru Kenyatta’s administration will be intensifying its fight against the notorious al-Shabaab terror outfit whose activities have strained the country’s resources. The country’s Treasury Cabinet Secretary, Henry Rotich, said allocations will enable President Uhuru Kenyatta to, among others, equip the country’s security forces with a dog for each police station and 14,000 new police officers recruited, according to Kenyan media reports. Nathan Gashayija, the director of the EAC Programmes Coordination Unit in Rwanda’s Ministry of East African Community Affairs, welcomed Kenya’s high security allocation, explaining that as a key partner in the Northern Corridor projects, peace and stability is critical for the projects’ successful implementation. “A peaceful Kenya has benefits for all (of us) because it’s a gateway to external markets through its port of Mombasa; remember when the country experienced post-election violence in 2007, our truckers were the most affected and this hurt the economy. So them spending on security is a welcome move,” said Gashayija. Health and education are the other sectors that have dominated allocations in the Kenyan budget with 18 per cent and 13 per cent, respectively. In education, for instance, Kenya will reportedly recruit at least 10,000 new teachers this coming year. Kenya’s most ambitious budget thus far, according to analysts, will also hugely benefit the country’s social protection programme for orphans and vulnerable children, whose beneficiaries will reportedly increase from 490,000 to 710,000 children. Tanzania’s tricky budget Tanzania’s Minister for Finance, Saada Mkuya, defied an especially tough 2014/15 financial year to unveil an even more ambitious budget of Tsh22.4 trillion (about Rwf7.2 trillion) for the upcoming 2015/16 financial year, up from Tsh19.6 trillion for the year ending June. But the move to increase the expenditure for East Africa’s second largest economy has left some analysts in Tanzania questioning the government’s ability to finance the proposed bill, especially after posting poor budget execution in the current fiscal year. “In the 2014/15 financial year, the government tabled a Tsh19.6 trillion Budget, a Tsh1.4 trillion increment over the 2013/14 budget, but in many cases, budget implementation was below 50 per cent,” said Peter Nyanje, an economy commentator. Key areas of focus include education, health, infrastructure, water, irrigation and energy. In its recent budget execution report on Tanzania, the International Monetary Fund (IMF) expressed concerns over the country’s poor budget execution for this financial year and advised the government to consider a more realistic expenditure plan for 2015/2016. “A realistic budget with a moderate deficit is a key prerequisite to avoid accumulating new arrears and large mid-year expenditure adjustments, and also to preserve debt sustainability,” said Hervé Joly, the mission head of IMF’s recent analysis of Tanzania. However, John Bosco Kalisa, from TradeMark East Africa, said the country’s increased expenditures shouldn’t be a concern if money is going to be invested in productive sectors that will boost economic activity. “If they can spend in areas such as infrastructure, this will definitely facilitate trade and improve productivity,” said Kalisa. Uganda to repay debt Although the theme for Uganda’s budget is ‘maintaining infrastructure investment and promoting excellence in public service delivery’, the country’s works and transport sector allocations only came second to debt repayment, which took the biggest chunk of the National Budget. Debt repayment, works and transport, energy, education, security and health, in that order, dominated the country’s total resource package of Ush23.9 trillion (about Rwf5.3 trillion) with domestic resources funding only 45 per cent of it and the rest through borrowing externally and internally. Uganda’s Minister for Finance and Economic Planning, Matiya Kasaijja, told parliament yesterday that his country’s stock of outstanding public debt was projected to reach $7.6 billion by the end of 2014/15 financial year, compared to $7.2 billion last year. He added that 60 per cent of Uganda’s debt stock was held externally, while 40 per cent is owed to domestic creditors. Uganda attributes the increase in its debt stock to an increase in the borrowing to finance infrastructure investment, according to Kasaijja. “Although our public debt has increased faster compared to past trends, it is sustainable in relation to the size of the economy,” said Uganda’s Finance Minister who was reading his first budget since his appointment four months ago. Uganda’s debt to GDP ratio is estimated at 30.4 per cent, which is safely below the country’s 2013 public debt management framework threshold and the East African Community Monetary Union convergence criteria requirement of 50 per cent. “Our strategy next financial year and the medium term will focus on accelerating infrastructure development to address the constraints to private sector growth and increase efficiency in service delivery,” Kasaijja said. Where does Burundi stand? Burundi’s budget was not presented yesterday along with that of other EAC partner states because it has not yet aligned its budget process to the bloc’s calendar; doing so would first require a constitutional amendment process. The country’s parliament had launched the process, last year, but the move was stalled early this year, reportedly because opposition lawmakers thought the government wanted to use the chance to change other clauses in the constitution, including the one on presidential term limits. Unlike other EAC partner states, Burundi’s financial year begins in January and ends in December, so the country’s budget will be read at the end of this year. But as countries of the EAC enter the new fiscal year in a buoyant mood to sustain the region’s economic growth, Burundi is wallowing in political impasse.

News

Security, debt and infrastructure dominate budget of regional states