EAC member states budget expenditure swells

Kampala. East Africans should prepare to pay more taxes, following most member country states’ proposals to increase their national budgets for next financial year.
The EAC member states, in their budget proposals, show that governments’ major focus has been put on infrastructure to ease doing business, boosting the energy sector to support growing industries, communication, security and elections.

Regional budgets
In Uganda, there has been a sudden increment of the Budget from Shs18.4 trillion to Shs24 trillion, indicating a 33.3 per cent rise. Prior to that, the Ugandan budget estimates for the financial year 2015/16 had been tagged at Shs18.4 trillion, up from Shs15.5 trillion for the financial year 2014/15.
Similarly, Kenya—the region’s economic power house—has also indicated plans to increase its spending by 25 per cent.
A statement from Kenya president’s office shows that the Ksh2.17 trillion (Shs69 trillion) budget will be released starting this July, up from Ksh1.8 trillion (Shs57.3 trillion) for the financial year that is ending.
Rwanda—the region’s leading performer in the World Bank Doing Business survey— is proposing a minor increase of less than one per cent. Rwandan minister of Finance and Economic Planning Claver Gatete in April, while presenting the Budget Framework Paper for 2015/2016-2017/2018 proposed a 0.33 per cent increment in government spending.
Mr Gatete said the Rwandan government will spend FRW 1,768.3 billion in the next financial year 2015/16, (an increase of FRW5.9 billion), up from FRW1,762.4 billion for this financial year (2014/15).
In Tanzania, according to the pre-budget proposal presented to Parliament early this month by Finance minister Saada Mkuya Salum, the budget has been raised from Sh19.8 trillion in the current fiscal year to Sh22.48 trillion for the next one. This is contrary to earlier suggestions that Tanzania intended not to increase its budget plan and was projecting to spend TShs19.853 trillion (TShs29.7 trillion) in the 2015/16 financial year.

Reactions
Mr Kassim Omar, the Uganda Chapter Chair of the East African Business Council (EABC), criticises the regional governments’ plan to increase their budgets without widening the tax bases and instead strain the few taxpayers who comply.
He argues: “The tax bases in EAC is not broad enough for regional governments who think of straining the taxpayer who always complies, and leave the big fish to walk free.”
To widen the tax base, Mr Omar suggested, for example, that those who drive luxurious vehicles using diesel should be taxed more than their counterparts using petrol.
Expounding on widening the tax base, Dr Fred Muhumuza, an economist and financial inclusion manager at KPMG, said all the priority sectors are important but need to be balanced to increase competitiveness.
“Increased funding to roads and energy is raising interest rates which undermine the competitiveness of the private sector that is expected to use the same two facilities. It also undermines the dollar which is also a competitive variable,” Mr Muhumuza observed.
The tax collection is more of a political than technical issue because there are big companies which are exempted or given tax holidays.
He adds that there are other new areas which should be taxed to increase the tax collections, such as agriculture.
“People in Uganda are making a lot of money out of agriculture and should also contribute through paying taxes. If poor nurses and health workers pay taxes, there is no reason why somebody who sells a cow and earns Shs2 million doesn’t want to pay taxes,” Dr Muhumuza argued.
He suggested that scaling down on investment in roads and energy, and government consumption should also be looked into.

Priorities – How will the countries use their monies?
In Uganda, the theme for the financial Year 2015/16 Budget is: “Maintaining infrastructure investment and promoting excellence in public service provision for wealth creation and socio-economic transformation of Uganda’s economy.” The objective of this theme is to ensure continuous removal of the things that delay socio-economic transformation and prosperity as identified in the National Development Plan (NDP).
In 2015/16 Budget, in order to increase investments, government intends to facilitate private sector enterprise through providing sound macroeconomic stability with a stable rate of inflation averaging 5 per cent per annum, a medium-term fiscal deficit of 3 per cent, and a competitive exchange rate that promotes exports.
“Promoting foreign direct and portfolio investment through reducing Uganda’s risk profile by keeping sustainable debt levels and maintaining foreign reserves at least five months import cover to adequately buffer external shocks,” the framework paper said.
Other avenues through which government will support the private sector will be to enhance public support to private sector enterprise in developing technical expertise and entrepreneurship, especially for small and medium scale enterprises (SMEs).
Government also will focus on the effective delivery of infrastructure development and maintenance.
According to the framework paper, priority will be put on accelerating the construction and completion of on-going road projects and maintenance of the national, district, urban, community access road networks and numerous bridges across the country.
“Given the need to complete the ongoing road projects, government will not take on any new projects next FY 2015/16, with the exception of Hoima-Wanseko road due to its strategic position in improving the transport network in the Albertine region,” the paper noted.
Priority will be put on fast-tracking the construction of Karuma Hydropower Project (600MW), Isimba hydro power project (183MW), and other mini-hydro power projects such as Muzizi HPP.

Kenya
According to Kenya’s 2015/16 Budget Policy Statement (BPS), the increment in the Energy, Infrastructure and ICT sectors, is predominantly for the rail transport programme under the State department for transport.
“The programme will be allocated Kshs144 billion (Shs4.3 trillion) to develop 95km of the standard gauge railway (SGR), construction of two light rail systems and nine commuter rail stations,” the BPS mentioned.
The increments in the National security sector will be for both the Ministry of Defence and National Intelligence Service (NIS). The Ministry of Defence will get Kshs114.1 billion while NIS will be allocated Kshs20.1 billion. Both agencies will be charged with protecting citizens and restoring law and order.
Mr Aly Khan Satchu, a Financial Analyst in Kenya, said the security situation needs to be addressed and remains Kenya’s weak spot of the economy, in a way it is not apparently in Uganda or Rwanda, for example.
“The security conundrum needs to be tackled but tackled smart. For example, given that the problem is now on the inside and not the outside, debate about the security wall confirms a very big disconnect. Therefore, all our investments start with security,” he noted.
Kenya’s government will also invest in infrastructure in form of establishing first-class rail and road networks; navigable waterways; modern and efficient ports and harbours; and expand handling and storage capacity to reduce the cost of doing business, enhance competitiveness and transform Kenya into a logistics hub for Eastern Africa.
Kenya’s government will also focus on increasing access to affordable and reliable energy supply. The 2015 BPS promises to connect at least one million Kenyans to power in 2015 and reduce the cost of power.

Rwanda
Rwanda’s minister Gatete said in the 2015/16 fiscal year, government will implement aggressive reforms to address the vulnerability of agriculture production, ensure fast implementation of both private and public projects in the industrial sector and promote thriving services.
“The reforms will entail addressing energy supply constraints; prioritisation of infrastructure towards productive uses; implementing a private sector-led approach to exports; and intensifying efforts to increase agriculture productivity,” minister Gatete said.
Dr Muhumuza while sharing his expert opinion on Rwanda’s focus on harnessing agriculture said: “Agriculture at this point is good because it feeds more people in terms of employment and helps to create food security in a populous country.”
He added that industrialisation will help them add value to their products produced and because of this, they will be competitive on the export market.

Tanzania
According to reports in our sister newspaper The Citizen, available estimates show that the Tanzanian government plans to raise Sh14.82 trillion from its own sources. The proposal indicates that Tanzania Revenue Authority is expected to collect Sh13.35 trillion.
Tanzania’s development expenditure is expected to decline to 26 per cent to Tshs4.78 trillion in 2015/16 from an estimated Tshs6.47 trillion in the current budget.
As a result, its recurrent expenditure is seen rising to Tshs15.06 trillion from Tshs13.38 trillion previously, largely due to increased government spending for presidential and parliamentary elections expected in October.
Finance minister Ms Saada Mkuya Salum said in a pre-budget presentation to parliament that the Tanzanian government plans to borrow Tshs5.767 trillion from domestic and external commercial sources to meet the expanded budget which runs from July to June next year.
The 2015/16 budget will give priority to costs of financing the general election, completion of ongoing projects and give a special push to rural electrification, water and human resource development,” Ms Salum told a parliamentary budget meeting.
Tanzania is expected to hold a referendum on a new constitution before presidential and parliamentary elections are held in October.
Ms Salum said government spending would also target key infrastructure projects in the energy and transport sectors.
Tanzania wants to upgrade existing railways and roads to serve growing neighboring landlocked economies such as Uganda and Rwanda.

Achievements

Uganda: In Uganda, the total budget allocation to Works and Transport increased to Shs2.4 trillion for FY2015/16, up from Shs1.7 trillion allocated in the FY 2013/14. With these resources, government has improved the road condition of unpaved and paved road networks in 2014 and intends to improve it further in the next financial year. Currently, the construction of approximately 1,100km of national roads at various stages has been achieved, including the famous Hoima-Kaiso-Tonya and Mbarara-Isingiro-Kitagati among others.
Rwanda: In Rwanda, the performance of fiscal year ending 2014/15 was driven by favourable weather conditions that contributed to high growth in agriculture. ower oil prices and low inflation environment favoured trade and services. “It is under the above backdrop that the economy grew by 7 per cent in 2014 well above 2013 growth of 4.7 per cent. The services sector grew by 9 per cent compared to 5 per cent in 2013,” Minister Gatete told members of both chambers of Parliament.

Kenya: Some of Kenya’s achievements were the commencement of the first phase of construction of the Standard Gauge Railway which is expected to be complete in 2017. The modern Jomo Kenyatta International Airport (JKIA) and commuter railway is another achievement and will be officially commissioned in 2017.

How regional Budgets have been increased

Shs69 trillion
Kenya’s budget up from Kshs1.8 trillion (about Shs57.3 trillion) last year.

Shs32 trillion
The Tanzanian budget up from TShs19.853 (about Shs27.19 trillion) last financial year.

Shs24 trillion
The 2015/16 budget of Uganda up from Shs18 trillion last financial year.

Shs7 trillion
The Rwanda’s budget up from FRW 1,762.4 billion (about Shs7 trillion).

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