Thursday, June 14, 2018

New financial year, new financial woes

 

By Karl Lyimo

Today is Budget Day – and Fifa World Soccer Cup Finals.... But, taking into account such demonic factors as inflation, currency fluctuations, under-target revenue collections, late and/or under-disbursements of pledged budgetary support by development partners and a bazillion human peccadillos: who can rightly say new budgets are an improvement over previous ones?

Well, I jump the starter’s gun here… June 14th this year is Budget Day in many of the six-country EA Community, including the two leading economies, Kenya and Tanzania.

With an estimated (US)$74.7 billion GDP in 2017, Kenya’s budget for the new financial year (FY-2018/19) is Ksh2.4 trillion.

By comparison, Tanzania – whose 2017 GDP was estimated at (US)$50.5 billion (roughly 67.6 per cent of Kenya’s GDP) – has a proposed budget of (T)Sh32.4 trillion for FY-2018/19.

Now, wait a minute…

At a passing glance, one is sorely tempted to conclude that, although Kenya’s economy is bigger than Tanzania’s by around a third, that country’s FY-2018/19 budget – at Sh2.4 trillion – is only 7.4 per cent of Tanzania’s budget of Sh32.4 trillion!

Perish the thought. This is because such ‘off-the-cuff’ thinking – and the conclusions drawn from that – would not have taken into account the vast difference in the value/power of the two countries’ currencies.

This is especially the case in terms of the exchange rates between the two national currencies and any of the word’s ‘hard currencies.’

Take the US dollar (USD/US$/$/Yankee dollar) as an example. While, for instance, the Tanzanian currency exchanges at Sh2,274.24 to one Yankee dollar, Kenya’s currency exchanges at the relatively low (in numerical terms) Ksh100.78 to the dollar!

The two east African economic (mini)giants tower over their fellow EAC member countries Uganda (GDP in 2017: US$27.6 billion; exchange rate: 1 US$ = Ush3,807.13); Rwanda (GDP U$8.6 billion); South Sudan: (GDP: US$3.6 billion), and Burundi (GDP: US$2.6 billion).

So, when all is said and done, there is usually very little that’s similar or common among the government budgets of the EAC countries. This is other than the facts that, for example, the three EAC founders – Kenya, Uganda and Tanzania – use the ‘shilling’ as their monetary unit, inherited from their common colonial master Britain.

But the ‘three-family’ shillings are not valued at par. Nor are the ‘two-family’ francs of Rwanda and Burundi…

Southern Sudan has the ‘pound’ as their monetary unit, comprising 100 ‘piasters’ – and exchanging at pounds130.3 to the US dollar.

I’ve gone to great lengths here on the EAC member countries’ vast econo-financial disparities that make it difficult – if not impossible – to have a more or less ‘common budget’ within the EAC framework.

So, we are always compelled to deal separately with each of the six national budgets.

Starting with Tanzania: we’re told that, at (T)Sh32.4 trillion, the FY-2018/19 budget is higher (by some Sh0.7 trillion) than the FY-2017/18 one of (T)Sh31.7 trillion. [See ‘Review of the Budget 2017/18;’ The Citizen, June 22, 2017. Fair enough…

But, taking into account such demonic factors as inflation, currency fluctuations, under-target revenue collections, late and/or under-disbursements of pledged budgetary support by development partners and a bazillion human peccadillos: who can rightly say new budgets are an improvement over previous ones?

Who, indeed? Tears!

Mr Lyimo is a socio-economic commentator based in Dar.

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