There are still divergent views that need to be ironed out prior to developing a sustainable financing mechanism for the East African Community, the Council of Ministers meeting has reported.
The central decision-making and governing organ of the EAC convened for a three-day meeting to, among others, consider a report on finance matters that will be submitted to the six partner states’ leaders this weekend when they meet in Dar-es-Salaam, Tanzania, for their annual summit.
The bloc’s summit had, in March last year, directed the Council to finalise modalities required to establish a sustainable financing mechanism for the Community based on various options, including a hybrid of a levy and equal contribution with a commitment to increase the budget, that encompasses the principles of equity, solidarity and equality, and submit a report to the next summit for consideration.
“The report on sustainable financing mechanism did not sufficiently address the summit directive since it does not address pertinent issues concerning sustainable financing,” the ministers said in a statement.
Last week, a two-day session of the sectoral council of finance and economic affairs was held in Arusha, Tanzania, to consider the sustainable financing mechanism for the Community.
The council’s report notes that in their recent meeting, regional ministers of finance made observations that the Council must take note of such as the expansion of the EAC and the associated budget pressure, which may necessitate a comprehensive review of the bloc’s programmes, projects and activities regarding the budget.
Contributions by partner states
The Council reported that the May 7 to 8 session of the sectoral council of finance and economic affairs “had divergent views on whether contribution by partner states should be on equal basis or differentiated according to partner state’s ability to pay.”
It is noted that Tanzania, Kenya and Uganda backed the existing equal contribution arrangement by partner states on grounds that all are equal partners and should contribute equally to avoid the potential need for introducing voting rights according to contribution of each partner state.
According to the Council’s report, Rwanda and Burundi “preferred differentiated contribution, including the option of a levy on imports from outside the region on four grounds.
The two countries reason that the problem that needs to be addressed is to identify a sustainable source of funds for the EAC budget. Equal contribution, they say, may not be sustainable since it puts a heavier burden on some partner states depending on the size of their economies.
Rwanda and Burundi maintain that AU members’ contributions are assessed on the basis of the size of the economies and yet this has not called for a bigger voice by higher contributors.
The two countries also say that, although a levy on imports from outside the region may increase the cost of doing business, the money is essentially used to create a better business environment in the Community.