EAC budgets reflects growth in regional economies - expert

East African countries are focused on sustaining economic growth in the region as reflected by the sustained increase in the size of the four national budgets the new financial year 2010/2011, an expert has said.
Finance Minister John Rwangombwa arriving at parliament on Thursday (File Photo)
Finance Minister John Rwangombwa arriving at parliament on Thursday (File Photo)

East African countries are focused on sustaining economic growth in the region as reflected by the sustained increase in the size of the four national budgets the new financial year 2010/2011, an expert has said.

Presenting their budgets simultaneously on Thursday, all the four finance ministers of Rwanda, Uganda, Kenya and Tanzania announced increased government spending.

Specifically, Rwanda announced a budget worth Rwf984 billion from Rwf849.0 billion last year, Uganda shillings 7.7 trillion up from shs7.3 trillion in the current financial year and Kenya from Kenya shilling 998.8 billion. Tanzania also jumped to Tanzanian shillings 11.6 trillion from shs9.5 trillion last year respectively.

Addressing a cross section of corporate executives attending a joint EAC budget review breakfast meeting yesterday, Golf Gurmit Santokh, a consultant with Ernst and Young Rwanda office observed that in general EAC budgets have grown in size over the years reflecting growth in the size of economies.

“By virtue of the fact that they (East African countries) are reading bigger budgets it means that the economies have grown to a level where various governments can source funds from taxation and that means businesses are growing in all these countries,” said Santokh.

The budget breakfast was sponsored by Ernst and Young Rwanda and Alliance Insurance Brokers.

Santokh also noted that the increase in spending will facilitate governments to move away from spending more on recurrent expenses such as salaries to funding bigger projects that promote economic growth.

“Now there is a move towards capital expenditure i.e. more of roads, bridges, dams, hydro power, things that have a big impact on the growth of any economy,” he said.

“For the first time we are seeing East African countries are coming out of normal recurrent expenditure to capital expenditure on account of a bigger budget,” he added. 
Santokh also noted that the different finance ministers allocated funds to sectors that are generally demanding in terms of economic growth.

“Sectors that benefit growth have benefited; education, health, infrastructure; this was a common thing among all the East African countries,” he said.

However with increased spending, countries will boost spending through more domestic and external borrowing expanding their budget deficits.

“Key challenge; none of them (budgets) is fully balanced, it is going to be a challenge to meet the deficit and secondly the absorption capacity,”

With Kenya going into a constitutional referendum in August, Rwanda, Burundi and Tanzania going into election this year, Uganda in 2011, Santokh expressed optimism that the process will be smooth and not disrupt business.

Despite the impact of the global financial crisis, EAC countries maintained positive economic growth (Gross Domestic Product (GDP) rate over 4 .8 percent in 2009, while forecasts for 2010 indicate an average growth rate of 6.1 per cent for East African economies.

Rwanda ‘s GDP growth is expected to rebound to 7 per cent in 2010 up from 6 per cent recorded last year while Kenya GDP growth in the range of  4- 5 percent from 2 percent in 2009.

Tanzania expects the economy to grow by 6.5 percent compared to 6 percent in 2009, while Uganda the economy to grow from 5.8 per cent in 2009/10 to 6.4 per cent next financial year.

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