EAC revenue hit by financial crisis

“The revenue and expenditure budget is being tabled against the backdrop of a serious global financial and economic crisis that will adversely impact our economies” - Monique Mukaruliza  Member states of the East African Community (EAC), are being affected by the global financial crisis, with the latest being a sharp decline in revenue collected, a senior official of the EAC has said.
Minister for East African affairs Monique Mukaruliza delivering her opening remarks during a recent EAC retreat (File Photo)
Minister for East African affairs Monique Mukaruliza delivering her opening remarks during a recent EAC retreat (File Photo)

“The revenue and expenditure budget is being tabled against the backdrop of a serious global financial and economic crisis that will adversely impact our economies” - Monique Mukaruliza 

Member states of the East African Community (EAC), are being affected by the global financial crisis, with the latest being a sharp decline in revenue collected, a senior official of the EAC has said.

Of the five EAC Partner States, Tanzania has been hit most recording a fall of $192 million by March 2009 of its domestic revenue. This is expected to rise to $369 million at the end of the fiscal year at the end of this month. This deficit represents a revenue decline of 25 percent.

“The revenue and expenditure budget is being tabled against the backdrop of a serious global financial and economic crisis that will adversely impact our economies as well as those of our major development partners,” cautioned the chairperson EAC, Council of Ministers, Monique Mukaruliza.

She was presenting the EAC budget for the Community for the financial year 2009/2010, to the East African Legislative Assembly (EALA) on Thursday last week in Burundi. 

In the case of the developing countries of which the EAC economies are part, Mukaruliza said are already being hard hit by the crisis.

“ Moreover, with the sharp increase in food prices, which may not decrease this year, especially for Kenya and Tanzania, following the drought that has afflicted these two countries early this year,” she added , also citing inflationary pressures that  have hit all  EAC countries.

In Kenya, inflation climbed to 26.1 percent in April this year largely driven by high food prices.  In Rwanda, it stood at 17.08 percent in March 2009 (largely driven by rise in costs of housing, water and energy).

In Burundi it was 19.8 percent in March, in Tanzania it was 13 percent in March and in Uganda it was 13.4 percent in April. 

Mukaruliza however noted that though Kenya registered a revenue loss of $180 million for the period of July 2008-March 2009, there appears to be confidence that there will be revenue stability up to June including Uganda, Rwanda, and Burundi partner states respectively. 

“Partly due to the contraction of all the EAC economies, domestic revenue in 2009/2010 will decline,” she underscored.
Mukaruliza also drew attention to revenue loss that Rwanda and Burundi, the new entrants to the Community will incur in July when they start implementing the EAC Customs Union tariffs.  

Rwanda has estimated a revenue loss of $ 10.9 million (Rwf 6.2 million) in its fiscal year 2009/2010.

The Ministry of Finance has projected that the country will lose Rwf 12.4 billion.

While Burundi is expected to lose revenue equivalent to 0.4 percent of their Gross Domestic Product (GDP) as a result of introduction of Value Added Tax (VAT) in addition to applying the Common External tariff.

Most EAC Partner States had estimated Gross Domestic Product (GDP) growths of above 8 percent for the fiscal year 2009/2010. 

The International Monetary Fund puts this growth rate at the average of 5.5 percent for Kenya and Uganda with Tanzania at between 4-5 percent. Rwanda is estimated to grow at 5.6 percent and Burundi at 4.8percent.

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