Budgets: Will intra-regional trade spur nations growth?

Arusha. After the devastating Covid-19 and the impact of other global dynamics, will increased intra-regional trade boost growth in East Africa this time around?

Four members of the East African Community (EAC) tabled their annual budgets for 2023/24 financial year on Thursday with optimism about recovery.

Tanzania, the second-largest economy, anticipates 5.2 percent growth in 2023/24 while Uganda is projecting six per-cent growth.

On the other hand, the Kenyan economy is expected to grow by 5.5 percent in 2023, supported by private sector growth.

Kenya banks its growth on the strong performance of the services sector, recoveries in agriculture recently hit by drought, and public sector investments.

Tanzania, which was spared the worst impact of the drought, projects to finance 70.7 percent of the budget with domestic revenues.

Another 12.3 percent of the revenues will come from development partners in the form of grants and concessional loans.

Domestic borrowing will bring in 12.3 percent, while another 4.7 percent will be sourced from external non-concessional sources.

The finance ministers of Tanzania, Uganda, Kenya, and Rwanda presented their budgets in Parliament on Thursday with varying priorities.

A quick glance, however, saw infrastructure given much emphasis; as a key factor driving the economies.

According to the EAC Treaty, the Finance Ministers of the partner states are required to read their budgets simultaneously under a common theme.

However, this has not yet worked perfectly with countries that joined the bloc recently, like the DR Congo.

Others, like Burundi and South Sudan, still subscribe to the old order of reading their budgets in tandem with the calendar year. As has been the case for many years, Kenya topped the six other EAC partner states in the size of its budget, being the largest economy.

The Finance Cabinet Secretary, Mr Njuguna Ndung’u, requested the approval of $25.7 billion from Parliament for 2023/24.

Tanzania’s budget size for the period tabled in Dodoma on Thursday by Finance Minister Mwigulu Nchemba was $19.2 billion.

DR Congo, a new entrant to the community, trails Tanzania closely with an annual budget amounting to $16 billion for 2023.

Uganda, which targets six percent growth in the coming fiscal year, tabled its 2023/24 budget estimates of $13.9 billion.

Annual budgets for Rwanda, Burundi and South Sudan were estimated to be $4.4 billion, $1.4 billion and $1.3 billion, respectively.

When he presented his budget estimates, Dr Nchemba was categorically clear that infrastructure and infrastructure-related projects would indeed take centre stage this time around.

These are in the road sector, transportation, mining, oil and gas, industry, energy, agriculture, and enhanced public-private partnerships, among others.

One of the key transport infrastructures to receive a significant budget for implementation is the Standard Gauge Railway (SGR).

The EAC secretary general, Dr Peter Mathuki, said the national budgets of the partner states have been tabled at a time of good signs in regional trade.

According to him, the total EAC trade increased by 13.4 percent to $474 billion last year from $65.2 billion in 2021.

The major intra-EAC traded products are cereals, cement, iron and steel, live animals, petroleum products, sugar, foods and beverages.

He said EAC’s planned projects and programmes during the 2023/24 financial year will be implemented against a back-ground of encouraging signs of growth.

In 2022, the economies in the region experienced global shocks from the Ukraine war; which fuelled a rise in food and energy prices.

The lingering impact of Covid-19 and tightening financial conditions were worsened by the recent adverse effects of climate change.

However, Dr Mathuki said in a statement released early this week that there were strong indications of recovery in the region this year. The positive outlook will be driven by expectations of a recovery in agriculture and the strong performance of the services sector.

“Growth will also be supported by increased public and private investment and improved exports,” he pointed out.

According to him, the pressures on inflation within the region are expected to ease in the coming months.

These will be supported by the monetary policy stance already adopted in the region, improved food supply, and moderation in commodity prices in the global market.

In Tanzania, the budget proposals to scrap some taxes and levies were welcomed by some stakeholders, especially in the tourism sector.

Mr Wilbard Chamburo, the chairman of the Tanzania Association of Tour Operators (Tato), said local investors would benefit from the tax review.

The same would apply to the reopening of the foreign exchange shops that were closed in 2018 by the government, impacting the tourism sector.