Locked and loaded: Where East Africa's priorities lie

Saturday June 18 2022
EAC PIC
By Alex Nelson Malanga

Dar es Salaam. The East African member states’ budgets for the 2022/23 financial year are a tough juggle for the governments as they try to balance stakeholders’ expectations amid increasing internal and external uncertainties.

In the midst of economic impacts of Covid-19 pandemic and Russia-Ukraine war, undoubtedly, governments are confronted with significant public expenditure demands including protecting livelihood, creation of an enabling environment for businesses and election related spending.

Expectations from the budgets that were presented in respective Parliaments between April and June, have been high, with stakeholders from various fronts wishing to see the budget that will take them to the pre-Covid economic performance. In a swift rejoinder, the East African countries’ budgets for the next financial year have come up with measures mainly meant to power the recovery plan.

Tanzania, Kenya, Uganda and Rwanda are all singing the same song: ‘stimulating resilient and sustainable economic recovery through both fiscal and monetary measures’.

Tanzania, which unveiled its Sh41.48 trillion budget on Tuesday, has embarked on cost cutting measures and a number of initiatives meant to boost economic recovery.

Presenting the budget, Finance and Planning minister Mwigulu Nchemba proposed amendments to various laws in 18 areas through the Finance Act 2022/23 that will further improve the business environment.

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These reforms intend to, amongst other things, maintain stability and predictability in the tax system and improve efficiency in revenue collection and management.

Deloitte Tanzania tax partner Festo Bartholome said the Sh41.48 trillion signals a weighty commitment towards the national development agenda, it is a multi-sectoral and multi-player effort.

“With proper execution of this budget, we are moving in the right direction of accelerating recovery and sustaining growth,” observed Mr Bartholome.

Tanzania has revised its Real gross domestic product (GDP) growth rate for 2022 to 4.7 percent as the ongoing tension in Ukraine weighs in on the ongoing economic recovery.

The projection is lower than the earlier estimates of 5.5 percent.

Kenya, for its part, unveiled a $28 billion budget (about Sh64.4 trillion) budget for the 2022/23 fiscal year aimed at reviving the country’s economy. Treasury Secretary Ukur Yatani said the budget would focus on building infrastructure that would reduce the rates of unemployment and grow the economy by six percent by the end of the year.

Deloitte East Africa tax leader Fred Omundi said in their budget highlights 2022/23 document that being an election year also means that it would be an inopportune moment to introduce measures that negatively impact taxpayers.

Kenya’s GDP rallied from 0.6 percent growth in 2020 to six percent in 2021.

Despite the expected increase in government spending in 2022, GDP is projected to grow at a moderate rate of 4.5 percent owing to uncertainty linked to the general election in August; and unfavourable weather conditions expected in most parts of the country throughout the year.

On the other side, Uganda, which tabled a $12.83 billion (about Sh29.5 trillion) budget for the new fiscal year, its 2022/2023 national budget is critical for the recovery and stability of businesses, especially Small and Medium Enterprises (SMEs) that are the backbone of Uganda’s economy.

Uganda Deloitte’s country managing partner Nobert Kagoro said Deloitte was committed as a strategic partner to both government and private sector to facilitate recovery and sustainability of businesses.

He also expressed their commitment to optimising the use of technology like Deloitte experts to find solutions that empower people and stakeholders to make an impact that matters to the shared challenges.

“This budget has been passed in the context of an economy trying to recover from the impact of the Covid-19 pandemic, skyrocketing prices underpinned by rising price of fuel and a global economy that is being predicted by the slump from 5.7 percent in 2021 to 2.9 percent in 2022 as well as warnings from World Bank of a recession in most countries,” he said. Uganda’s GDP is projected to grow by 4.9 percent this year compared to 5.1 percent recorded last year.

In Rwanda, Finance and Economic Planning minister Uzziel Ndagijimana said the next financial year of Rwf4.6 trillion budget will focus on implementation of government strategies meant to resuscitate the economy from the Covid-19 pandemic to attain the pre-pandemic growth level.

It is projected that Rwanda’s economy will grow by six percent in 2022 compared to 10.9 percent in 2021 which was registered as the country’s output started recovering from pandemic-induced recession.

University of Dar es Salaam’s Economics don Abel Kinyondo commended the East African countries for seeing the need for coming up with realistic budgets.

“We need to be resilient. We need to have domestic solutions in place to be able to absorb external shocks,” opined Dr Kinyondo to The Citizen yesterday. “There is no need for us to depend solely on fuel. We need to shift from fossils to alternative sources of energy.”

The renowned economist, Prof Humphrey Moshi recommended the East African countries to use Covid-19 and Russia-Ukraine war as a wakeup call.

“We need to prepare ourselves for external shocks. There is no reason for us to import cooking oil and wheat,” he stressed.

Further he suggested that the tax base be broadened.