12 June 2014

East Africa: EAC Nations Register Sound Economy

Photo: EAC
East Africa Community member states budget to focus mainly on infrastructure.

THE governments of Kenya and Uganda have projected strong economic growth for the financial year 2014/2015, due to bold economic policies, structure reforms and strong economic management on the Kenyan front.

Uganda banks, among others, cash crop production, manufacturing, mining and increased electricity production are the major drivers. Rwanda on the other hand plans to spend 1.75 trillion Rwandan francs (approximately US 2.58 billion dollars) in the financial year 2014/2015.

The budget announcement is coordinated across the East African Community, which includes Kenya, Uganda, Rwanda, Burundi and Tanzania.

In Kenya, according to the Standard Digital News, the Kenya's Finance Minister, Henry Rotich, said growth prospects remain strong and resilient due to continued implementation of bold economic policies, structural reforms and sound economic management.

"Prudent economic policies have helped anchor the conditions for strong and stable growth. We have been able to anchor inflation expectations down," he explained.

Rotich said the economy is focused to grow by 5.8 per cent and 6.4 per cent in 2014 and 2015 respectively. On Security the Kenyan Finance Minister said enhancing the nation's security was vital for the economy to grow and create jobs.

Outlining revenues and spending taking into account commitments from international development partners, Rotich said: "This will leave a deficit of 190.8 billion Kenyan shillings ($2.18 billion), equivalent to 4.1 per cent of GDP, which will be financed by net borrowing from the domestic market."

He said the government's borrowing plan remains anchored in the medium-term debt management strategy. In Uganda the Gross Domestic Product (GDP) growth is expected to grow at 6.1 per cent, the country's Finance Minister, Maria Kiwanuka, said.

According to the Uganda's New Vision, the Finance Minister said cash crops production, manufacturing, mining and quarrying, increased electricity production, and transport and communication are projected to be the major drivers of growth. "Uganda's economy continued to grow through Financial Year 2013/14 albeit more modestly than the 6.2% that was projected a year ago," she said. This was a result of a slow-down in performance by the manufacturing, construction, telecommunication and financial services sub-sectors, Kiwanuka added.

The theme for the 2014/15 budget is "Maintaining the Momentum: Infrastructure Investment for Growth and Socio-Economic Transformation." According to the minister, the ongoing unrest in the region reduced our export and remittance proceeds, and the last stages of the global crisis effects were played out on the world stage towards a new equilibrium.

"Although the estimated growth has been less than expected it still represents a credible performance by our economy, and is higher than the average growth achieved by the non-oil producing countries in sub Saharan Africa, estimated at 5.3 per cent in 2013," she stated. The minister reiterated Government's medium term objective to restore real GDP growth to 7 per cent per annum. She said that: "This will require continued implementation of sound macro-economic policies, implementation of financial sector reforms and the acceleration of the intervention required in removing bottlenecks to private sector development and competitiveness." On inflation, she said inflation has remained low this year and dropped to 5.4% by May 2014.

Annual core inflation declined to 3.3% as of end-May 2014. The minister attributed this to the slowdown in price increases following a reduction in food prices resulting from drought in the first half of this financial year.

In Rwanda according to Reuters, the government said it planned to spend 1.75 trillion Rwandan francs (approximately US 2.58 billion dollars) in the 2014/15 fiscal year, compared to 1.6 trillion francs of spending in the 2013/14 revised budget.

It forecast a cash deficit of 177.2 billion francs, which it said was lower than the revised 2013/14 budget which had forecast a deficit of 271.2 billion francs.

The deficit would be financed with net foreign loan receipts of 107.6 billion francs, while the domestic borrowing would contribute 69.6 billion franc, it said.

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