East Africa states treasuries’ pressure to fund campaign projects

Saturday August 12 2023

President Yoweri Museveni (C) opening a newly constructed road in western Uganda on January 26, 2023. PHOTO | UGANDA PRESIDENTIAL PRESS UNIT


Finance ministry and central bank officials in East Africa are under pressure to mobilise resources to finance projects pledged during election campaigns, reward political loyalists and pay off debts, amid tightening financial conditions in local and foreign markets.

The technocrats are carrying out a balancing act in allocating resources to finance government operations, service debts, fulfil voter promises and implement stimulus programmes to shore up economies saddled by rising inflation, depreciating currencies and the high cost of living.

Heads of state in the region are racing to lay foundations for re-election, with elections coming up in DR Congo in December, in Rwanda in 2024, Tanzania in 2025, Uganda in 2026 and Kenya in 2027.

Read: Wave of change blows across East Africa

The Kenya Kwanza administration, which ascended to power last year on a platform of economic transformation for the poor, is now facing a public backlash over increased cost of living and doing business fuelled by soaring food and energy prices. President William Ruto has pushed through unpopular tax measures to calm his support base and potential meltdown as the opposition sponsored protests in major towns, disrupting economic activity.

President Ruto in his manifesto promised to prioritise bringing down the cost of living, eradicating hunger, creating jobs, expanding the tax revenue base and improving the country’s foreign exchange balance.


But the financial implication of these promises, compounded by the increasing pressure over debt repayment, is now taking a heavy toll on government finances.

The economy is staggering, and its growth declined to 5.3 percent in the first quarter (January-March) of this year from 6.2 percent recorded in the same period last year.

Read: Kenya's growth slows to 4.8pc

Data from the National Treasury shows that the government started the 2023/2024 fiscal year on July 1, with only Ksh2.61 billion ($18.25 million) in the consolidated fund.

This is after spending 35 percent (Ksh1.16 trillion; $8.11 billion) of the total revenues on debt repayment and increasing funding to the President’s office by Ksh8 billion($55.94 million) in recurrent expenditure in the last fiscal year. Among other pre-election pledges was a commitment of Ksh50 billion ($349.65 million) ever year to MSMEs and Ksh250 billion towards affordable housing plan in five years, of which Ksh50 billion relates to budgetary allocation and Ksh200 billion ($1.39 billion) to be financed by pension funds.

President Ruto, whose first budget has been criticised for adding a burden on Kenyan households and businesses already struggling with the high cost of living and doing business, prioritised increased domestic revenue collection to make the country less reliant on external debt.

This led to the enactment of a controversial Finance Bill (2023) into law seeking to raise Ksh211 billion ($1.47 billion) through punitive tax measures such as doubling of VAT on fuel to 16 percent, introduction of 1.5 percent housing levy on salaried workers and employers and increase of Pay As You Earn on workers earning Ksh500,000($3,496.5) and above.

In Uganda, President Yoweri Museveni’s administration is mobilising resources to ensure the successful implementation of the Parish Development Model (PDM), a plan to improve service delivery and alleviate poverty at the grassroots level.

But the first quarter of the current fiscal year is now punctuated by new demands coming from the need to hold local elections this year, to elect new grassroots officers needed to conduct administration tasks.

The country is also faced with another unplanned cost: Settling a pay dispute with intern doctors, something that had risked derailing smooth medical services in government facilities.

Read: Ugandan broadcasters threaten to boycott state events

Financing headaches

Parliament had approved Ush52.7 trillion ($14 billion) for 2023/24 in May, but fresh funding needs tied to facilitation of medical interns and preparations for election of village chairpersons across the country imposed further financing headaches just as the new fiscal year began.

Government’s tax revenue collection target was raised from Ush25 trillion ($6.8 billion) in 2022/23 to Ush29.7 trillion ($8 billion) in 2023/24, with a domestic borrowing target of Ush3.2 trillion ($873.5 million). The cost of domestic debt refinancing stood at Ush8.4 trillion ($2.3 billion) while total budget support was projected at Ush2.8 trillion ($764 million).

Experts think Uganda may now need to prioritise what is to be spent on. That would imply slashing travel, workshop and fleet management budgets at the end of the day. The fact that new tax revenues do not come in easily while government is struggling to pay off some old debts renders budget cuts essential,” he noted.

But the government says it will steady the ship. Patrick Ocailap, Deputy Permanent Secretary at the Finance ministry, said the government has no outstanding expenditure pressures as most suppliers have been paid and says even the upcoming international conferences scheduled from early 2024 have been budgeted for.

In Tanzania, President Samia Suluhu Hassan’s administration has prioritised agricultural productivity, with increased budgetary allocations to the sector. Her government has increased funding to the sector to Tsh970.8 billion ($388.92 million) in the current fiscal year from a low of Tsh294 billion ($117.78 million) two years ago.

Read: Samia: How Tanzania used IMF, AfDB loans

The increased funding seeks to increase availability and accessibility of agricultural inputs, establish block farming and improve research and extension services. It also seeks to ensure provision of fertiliser subsidy to farmers, construction and rehabilitation of irrigation schemes, and storage facilities.

President Samia has also been forced to increase the cost of fuel by 17 percent, with huge implications on economic growth after the removal of the Tsh100 billion ($40.06 million) fuel subsidy last year. But this freed more funds to the government, said Energy ministry Permanent Secretary Felchesmi Mramba.

The government is increased its spending plan for the 2023/2024 fiscal by 6.9 percent to Tsh 44.4 trillion ($17.78 billion) from Tsh 34.88 trillion ($13.97 billion) in the 2022-2023 fiscal year.

Finance Minister Mwigulu Nchemba increased mobile money transaction levy on withdrawals by 50 percent with hopes of raising Tsh16.71 billion($6.69 million) of additional revenue from the tax proposal Dr Nchemba also increased property tax from Tsh 12, 000($4.8) to Tsh 18, 000($7.21) for normal buildings and Tsh 60, 000($24.03) to Tsh 90, 000($36.05) for each storey building and increased the road and fuel tolls by Tsh100 ($0.04) per litre of petrol and diesel.

Read: Tanzania fuel prices increase

In Rwanda, the Rwandan Patriotic Front (RPF) is walking a tightrope trying to deliver on its promise to lift more citizens out of poverty ahead of the 2024 presidential election.

In its seven-year manifesto, RPF pledged to fast-track economic development, improve social welfare, and put in place good governance and justice systems. After securing a seven-year third term in 2017 President Kagame pledged to “continue transforming Rwanda and ensuring a dignified life for every citizen