EAC 2023/2024 Budgets: Purse-strings, fiscal cliff dominate the conversation

Early June, to much fanfare, the Finance Ministers of the East African Community will read their annual budgets to Parliament.

Budget reading is mostly a formality, as the budget estimates have already been passed. Uganda’s budget will cross the 50 trillion-shilling mark for the first time, or a little over $13.5 billion.

Uganda’s economic mainstays, for foreign exchange inflows in the last year are coffee sector accounting for $ 780 million, non-coffee exports $ 500 million and tourism $ 500 million.

Import cover reserves at the Central Bank according to the IMF are low but stable below the four months desirability. The currency remains stable, and economic recovery is driven somewhat by the early year rebound in coffee prices. 

Our currency is stable also due to negative factors like the collapse in purchasing power post Covid.

Many enterprises remain closed and nearly all banks minus Stanbic and Absa reported a rise in non-performing assets for the current period.

Our local unit is trading better against the Kshs, whose currency fell in value against the greenback in the run-up to and aftermath of the Kenyan general election in August 2022.

In February, Standard & Poors downgraded Kenya’s debt to high-credit risk, followed by Moody’s in May, increasing the country’s borrowing costs. Kenya after a few regional trips, and belt tightening officially announced it was having trouble meeting payroll.

In the traditional EAC, only Tanzania’s Madam Suluhu Hassan is running a fiscal surplus. She has loosened up the political tension by directly engaging the opposition, even appearing at their political rallies as she prepares for the 2025 General Election. 

Tanzania is very busy today, flush in receipts from tourism, minerals and a less politicised environment. 

The move of 200 government agencies to Dodoma has spurred a construction boom unparalleled on any scale in East Africa. Big lesson for Uganda and Kenya is that this money is remaining inside Tanzania. There is some differentiation in the two biggest economies. 

Tanzania is finally taking advantage of its vast size, deploying infrastructure across the country. Kenya is concentrating on its economic corridor and concentrating economic activity in the greater Nairobi megalopolis, a global 20, big city.

Rwanda is quiet as it also prepares for another general election in 2024. The tourism sector is strong. Instability in the DRC remains a big risk factor for Rwanda, Uganda and Burundi. 

Burundi is one of the world’s five poorest countries with the smallest EAC budget. The franco-phone corner of the EAC grew to 110 million people with the admission of the EAC, and soon the East African Community will have to contend with establishing an official status for its three most widely spoken languages, English, Swahili and French.

The DRC remains a troubled hotspot, and like neighboring Rwanda is months away from another general election due by the end of 2024.

There is a lot of optimism that the laggards in the community will pull up their strings. 2023 promises sufficient food for now, a low bar but essential bar to clear after rains mostly failed in 2021 and 2022 pushing up food inflation.

The effect of the war in Ukraine on petroleum prices which in turn pushed inflation with catastrophic consequences on the region’s transport cannot be forgotten.

In the medium term, global oil prices have cooled down but the relief is yet to be felt and the central banks have accordingly increased the reference rates, pushing up lending costs. 

The region’s biggest bourse, the Nairobi Stock Exchange, has underperformed for years.

The region’s biggest pension fund, Uganda’s NSSF, is in financial doldrums, after Parliament tweaked the initial proposal to have a one-time mid-term access permanent when it amended the NSSF law. 

Net outflows of Shs400 billion mostly went to the commercial banks who after they pre-financed most of the Corvid financial relief, needed a cushion.

The best visuals for the budget are a budget speech in Swahili, with translations in local languages. Our economies are still in a mirage.

There is some small speculation in Uganda that the iron sheets scandal will eat our budget speech. The Kenyan professor is promising only more pain. Ibariki Mungu !

Mr Karoli Ssemogerere is an Attorney-At-Law and an Advocate. [email protected]