East Africa Community countries have raised spending by 20 per cent for the next fiscal in their 2012/2013 budgets read on Thursday, with an eye on job creation, as respective Finance Ministers warn of tough economic times ahead.

The region’s economies have been battered by high food and fuel costs, fluctuating currencies and diminished revenue collection, and with pressures of surging unemployment, high cost of living and weakening currencies, the governments opted to increase spending that have left their frail economies with the biggest budget deficits ever.

Kenya, Uganda, Tanzania and Rwanda raised their combined spending from $26.6 billion in the 2011/2012 financial year to $32 billion in 2012/2013, according to budget spending plans released by the finance ministers.

Kenya’s total budget stands at Ksh1.4 trillion ($17 billion), up from Ksh1.1 trillion ($12.9 billion) while that of Uganda is Ush11.1 trillion ($4.4 billion) compared with last year’s Ush 9.2 trillion ($3.6 billion).

Tanzania will spend TSh15 trillion (9.5 billion), a rise from Tsh 13 trillion ($8.2 billion) compared with Rwanda’s Rwf 1.3 trillion ($2.3 billion), up from Rwf 1.1 trillion ($1.9 billion) in 2011.

Sharp increases in deficit levels are likely to raise governments’ borrowing costs, divert resources from crucial social services like health and affect the standards of living in the countries.

Spending to spur job creation

Statistics show that while governments across East Africa have been pumping billions of dollars into job creation initiatives, unemployment remains high.

EAC member countries have also allocated a huge chunk of their budget infrastructure development –– roads, railways and new power plants and transmission lines –– as well as social welfare projects like education, health and kitties for the vulnerable groups.

The risk of a widespread slowdown in the region still looms large with the Finance ministers citing the ongoing economic troubles in Europe as the biggest threat to trade and investments.

Kenya’s Finance Minister Robinson Githae said: “We expect inflation to continue to decline which will support lower interest rates and measures to be put in place to support the shilling going forward and the supply-side driven pressure on prices and the exchange rate will subside in line with the falling global oil prices and ample supply of food arising from the recent rains and expanded irrigation programme.

"They should also reduce pressure on imports and our current account, ”

Uganda’s Finance Minister Maria Kiwanuka said GDP growth slowed to 3.2 per cent last year with the economy expected to expand by the same margin this year while fiscal deficit including grants are expected to rise to 4.1 per cent of gross domestic product from 3.9 per cent in 2011/12.

Key highlights of the budgets for Kenya, Uganda, Tanzania and Rwanda.

Kenya - Total Budget Ksh1.4 trillion ($17 billion)

• Allocation to healthcare raised by Ksh 12.3 billion ($146 million) to the sector, raising the total allocation to Ksh85 billion ($1 billion) in this financial year.
• Kenyan import duty on galvanised wire to increase from zero per cent to 10 per cent to protect local manufacturing industry
• Excise duty imposed on cosmetics and perfumes at a rate of 10 per cent as a revenue measure to generate KShs.4.1billion ($1.6 million)
• Kenyan total fiscal deficit Ksh 250 billion ($2.9 billion), will be made up by domestic borrowing for budget financing with no funding gap.
• IEBC has to work smarter to deliver election with a Ksh 17.5billion ($200 million) resource envelop allocated to the Independent Electoral and Boundaries Commission
• Ksh 1.8 billion ($21 million) to resettling IDPs, bringing total amount spent on IDPs to Ksh 15 billion ($173 million) since 2008
• Ksh 8 billion ($92 million) to scale up irrigation-- advice is switch to drip irrigation as a more sustainable method
• Ksh 4.4 billion ($51 million) allocated to orphans and vulnerable children programme
• Kenya sets aside Ksh118.7 billion ($1.4 billion) for teachers salaries including hiring 10,000 additional teachers
• Road blocks and weigh-bridges will be removed or reduced to a bare minimum to ease movement of goods. The Kenya Revenue Authority (KRA) will be rationalised to establish a customs service as an autonomous entity.
• Ksh 1 billion ($12 million) will go to the National Agency for the Campaign Against Drugs to fully enforce the Alcohol Control Act
• Ksh 1.6 billion ($18 million) to strategic grain reserves, Ksh 2.6 billion ($30 million) to famine relief, and increase in contingency fund from Ksh 2 billion (23 million) to Ksh5 billion ($58 million)
• Education will receive an additional Ksh 19.2 billion ($221 million) bringing total education budget to Ksh 233.1 billion ($2.7 billion)
• Government will extend preferential treatment in public sector tenders to support SMEs
• Ksh 268.1 billion ($3 billion) will go to various infrastructure projects

Rwanda- Total budget is Rwf 1.3 trillion ($2.3 billion), up from Rwf 1.1 trillion ($1.9 billion) in 2011.

• For fiscal year 2012/2013 total grants of RWF 484($785.9million) billion have been projected as against RWF 463.5 billion($752million) in 2011/2012. This projection shows an increase of RWF 20.5 billion($33.2million).
• The revised allocation for salaries and wages of RWF 148.1 billion($240.32milllion) in 2011/2012 is being raised to RWF 181.6 billion($302million) in 2012/2013, showing an increase of RWF 33.5 billion($54.39million).
• The estimated investment in the Productive Cluster (Agriculture, Trade and Industry as well as Water and Environment) was RWF 573.0 Billion($930.45 million) and this accounted for only 16.7 per cent of the total budget.
• The total budget allocation for the Human Development and Social Cluster (Education, Health, Social Protection as well as Sports, Youth and Culture) is RWF 1,597.4 bn(2.59 billion)
• The total budget allocation for the Governance and Sovereignty Cluster (General Public Service, Justice, Law and Order as well as Defense) is RWF 1,631.5 billion(264.9 billion)

Uganda - Total budget is Ush11.1 trillion ($4.4 billion).

• Ugandan Excise duty on spirits made from locally made raw materials increases from 45 per cent to 60 per cent
• UShs290 billion ($115 million) salary increase for teachers, scientists and other civil servants
• Ugandan Salary increases for Primary School Teachers, and Science Teachers in Post O-Level institutions
• Government to undertake rehabilitation of windmills in Karamoja Region, to address constraints in water for production
• An additional 10 per cent income tax imposed on Ugandan individuals with chargeable income of USh 120 million ($0.5 million) and above, per year
• Ugandan PAYE threshold increased from UShs.130 billion ($51 million) to USh 235 billion ($93 million) per month and the tax bands will be adjusted accordingly.
• Uganda Budget to support anti-corruption agencies to tackle corruption in all government agencies
• Ugandan public sector efficiency and effectiveness of service will therefore be of paramount importance starting next financial year
• Ugandan government’s objective in the next financial year is to address poor child and maternal health
• Start construction of the 600MW Karuma hydropower project
• Complete preliminary designs for the 600MW Ayago and140MW Isimba hydropower projects
• Provide financial support in the construction of 125 MW of renewable Mini hydro projects.
• Government plans to eliminate 27 licenses which were found to be either obsolete or redundant.
• Establish a One Stop Centre to provide online registration services for the various licenses required to start a business.
• Commence rehabilitation of Mulago National Referral Hospital and construction of referral hospitals in Kirudu and Kawempe zones of Kampala, including finalisation of negotiations to construct a modern women’s hospital at Mulago.
• Enroll an additional 100,000 people infected with HIV/AIDS on anti-retroviral treatment.
• The government proposes to increase the withholding tax on income derived from treasury bills and bonds from 15 per cent to 20 per cent.
• The pay-as-you-earn threshold will be increased from USh.130,000 to Shs.235,000 per month and tax bands will be adjusted accordingly.
• The 18 per cent value added tax on water reinstated. This measure will generate USh.21.7 billion
• Excise duty on spirits made from locally sourced raw materials from increased from 45 per cent to 60 per cent.
• An ad valorem duty rate on undenatured spirits of Shs.2, 000 per litre or 80 per cent, respectively, whichever is higher introduced to curb undervaluation.
• Excise duty on cosmetics and perfumes set at 10 per cent

Tanzania - Total Budget TSh15 trillion ($9.5 billion)

• National Debt Stock (External and domestic debt) reached Tsh20, 276.6 billion ($12.86 billion) in March this year compared with Tsh17, 578.9 billion ($11.1 billion), at end March 2011.
• Public domestic debt stock increased by 10.5 per cent from Tsh4.49 trillion ($2.844 billion) as at March, 2011 to Tsh 4.9 Trillion ($3.15 billion) as of March this year.
  Government to commence construction of the Mtwara to Dar es Salaam gas pipeline using a loan amounting to USD 1,225.3 million from the Exim Bank of China.
• Introduce a 10 per cent withholding tax on interest income earned by non-residents from banks, as is currently the case with residents.
• Introduce exemption of Income Tax to the Dar es Salaam Stock Exchange (DSE)
• Exempt withholding tax chargeable by foreign banks on interests payable to strategic investors. This measure is expected to encourage investment in the country.
• Excise duty on imported juice of Tsh83($0.052) per litre introduced, locally made fruit juice to be taxed at Tsh8(0.0050 per litre
• Airport Service Charges for passengers travelling outside the county raised from $30 to $ 40, while passenger travelling to local destinations will now pay Tsh10,000($6.45) from Tsh5,000($3.23).
• Vehicles older than 20 years to be charged excise duty of 20 per cent.

Additional reporting by Peterson Thiong’o, Rose Mirondo, Christine Mungai and Dicta Asiimwe