23 June 2019

East Africa: EAC Risks Further Financial Doldrums As Members Delay Obligatory Payments

The East African Community could sink deeper into the financial doldrums after unveiling a $111.4 million budget for the 2019/20 financial year, amid the failure by member states to honour their financial obligations.

Some activities of the EAC organs and institutions are likely to stall or slow down due to member states delays in remitting their contributions for the 2018/19 budget, which stood at $99.7 million.

Despite tabling of an ambitious budget anchored in "transforming lives through industrialisation and job creation for shared prosperity," dismal adherence by members to budgetary obligations continues to be a bane in the region's integration journey.

BUDGET

The Community is going into a new financial year with a number of unfunded priorities occasioned by budgetary constraints.

By March this year when the East African Legislative Assembly approved a $12 million supplementary budget, Burundi and South Sudan had not remitted their full contributions for the 2018/19 financial year.

This has forced the Secretariat to look to development partners to finance key programmes and projects. Although donor contributions to the EAC budget have been declining -- considering that in 2012 this support stood at $124 million -- they remain the key financiers of the bloc's budget, contributing $43 million in the 2018/19 fiscal year.

While tabling the 2019/20 budgetary estimates before EALA, Tanzania's Deputy Minister for Foreign Affairs and East African Co-operation Damas Ndumbaro said the EAC expects to streamline and consolidate operational systems to achieve the desired level of efficiency, accountability and value for money.

"This year's budget is to include the continued and consolidated political support of the EAC integration and the availability of adequate financial resources and remittances," he said.

According to the estimates, EAC partner states are expected to finance the budget, with ministries of EAC Affairs contributing $49.7 million while ministries responsible for education and fisheries are expected to provide $4.3 million and $2 million respectively.

Yet again the budget demonstrates the unprecedented rate at which EAC has become dependent on foreign financing considering that development partners are expected to support the Community to the tune of $54 million.

"It's a good budget, save for ne reservation: EAC partner states have all along been delaying remitting their contributions to the bloc and, therefore, frustrating implementation of projects," said Fatuma Ali Ibrahim, EALA member.

Citing South Sudan, which joined the bloc over three years ago, but had never contributed a single cent, she said the trend did not only call into question the commitment of the partner states, but was also discouraging development partners whose contributions have been declining over the years.

PRIORITIES

The EAC Secretariat is the main beneficiary of the budget estimates, with a $53.2 million allocation, followed by EALA with $18.9 million while the East African Court of Justice has been allocated $4.2 million and the Inter-University Council for East Africa $9.5 million.

To achieve desired prosperity, the Community will prioritise the consolidation of the Single Customs Territory and promotion of intra and extra EAC trade and export competitiveness to propel regional growth.

The focus will also be on development of regional infrastructure, implementation of the Common Market Protocol and the enhancement of regional industrial development.

The Community is hoping to spur the declining intra-trade in the bloc.

Currently, the intra-EAC trade stands at 20 per cent compared with 68 per cent with the European Union and at 48 per cent with the Southern African Development Community.

The UN Economic Commission for Africa avers that the intra-EAC trade fell to $2.4 billion worth in 2017 from $3.5 billion worth in 2013.

The Commission attributes the decline to trade due to political tensions compounded by rising protectionism policies and loss of competitiveness among the region's manufacturers.

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