Road map for new EAC financing mechanism beckons

What you need to know:

  • Recommendations made by experts will be discussed at a ministerial meeting next month before the matter is escalated to higher authorities.

Arusha. A road map for a new financing mechanism for the East African Community (EAC) budget is finally in sight.

Recommendations made by experts will be discussed at a ministerial meeting next month before the matter is escalated to higher authorities.

"A modality for implementation has been agreed upon at a recent meeting held in Dar es Salaam," said Deng Alor Kuol, the EAC Council of Ministers chairperson.

The March 2024 meeting in Tanzania's commercial capital was attended by experts from ministries responsible for finance from the partner states.

Mr Kuol revealed this when responding to a question during the just-ended sitting of the East African Legislative Assembly (Eala) in Nairobi.

A lawmaker from Rwanda Ms Alodie Iradukunda wanted to know the progress made on the proposed sustainable financing mechanism for the EAC.

The question emanated from a new directive made by a summit of the regional leaders held in Arusha last November on the issue.

A hybrid model of financing the EAC budget was recommended by the ministers of Finance way back in 2021 following directives from the Heads of State.

Under the model, 65 percent of the budget is to be contributed equally by all the partner states; they are eight now.

Another 35 percent of the total budget is to be assessed based on partner states' average nominal GDP per capita for the previous five years.

In addition, it was also recommended that the proposed hybrid model be reviewed after three years.

The 23rd meeting of the Summit held in Arusha on November 24 last year considered and approved the recommendation.

The summit also directed the Council of Ministers to implement spending rationalisation measures and sanctions for defaulting partner states.

However, the regional legislator from Rwanda said she was concerned by the delay in rolling out the long-awaited financing model for the EAC budget.

Implementation has remained on the cards even after as the partner states have unanimously agreed on the financing formulae.

Mr Kuol, who is South Sudan's minister for EAC Affairs, affirmed that implementation of the directive was now on sight.

A meeting of the EAC Sectoral Council on Finance and Economic Affairs will be held next month (May 2024) to discuss how to roll out the new financing model.

Thereafter, the matter will be escalated to the Council of Ministers, a powerful organ of the Community which oversees budget allocation, among others.

Analysts said the proposed financing model for the EAC budget will partly depend on the size of the partner state's economy.

The sustainable financing project for the EAC was mulled and made public in 2011 and was aimed to address financial challenges facing the organisation. It is primarily targeted to shore up funding of the regional body's activities and operations from the mandatory contributions by the partner states.

This was necessitated by failure or delay by some member countries to remit funds to the Arusha coffers for multiple expenditures. For about a decade, EAC annual expenditure has revolved around $100 million, about a half through remittances by the partner states and the rest from the development partners.

For instance, of $103 million EAC budget for 2023/24 financial year, some $59 million (25 percent) would come from the partner states.

The remaining $44.8 million will be sourced from an array of the development partners supporting the Community.