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The East African Budgets: $34 Billion For Whom?
By Ahmed Salim
The East African budget season has now come to a close with all East African Community (EAC) partner states passing their 2012-2013 budget, with the exception of Burundi. As part of an agreement to harmonize and bring more convergence to their respective economies, the EAC partner states announced their budgets simultaneously in June 2012. The budget period encompasses a variety of narratives that serve as a progress report of where each country stands on their economic and development targets.
It is no secret that the recently announced East African budgets come at a critical time in the region. The vision and priorities that were highlighted in these budgets will be essential as the region moves forward and seeks to maximize on the growing global interest it has received, especially in light of the recent oil and gas discoveries. For Kenya, this is the incumbent President Mwai Kibaki’s last budget before the much-anticipated 2013 presidential elections. Tanzania’s budget comes at a time when the country is at a crossroads, having to adjust its priorities in light of recent discoveries of gas as well as domestic challenges that have highlighted the growing inequality and mistrust of government. Rwanda’s budget came in the midst of international controversy and accusations over its alleged role of supporting the M23 and causing instability in the Democratic Republic of Congo. This controversy forced Kigali’s hand to critically think about how it views general budget support from international donors. Is 48% (donor support for Rwanda’s 2012-2013 budget) too much? Donor dependence is an issue that all partner states of the EAC have to grapple with, however, things get complicated when general budget support gets political demonstrated by the diplomatic crisis that Rwanda faced between the DRC and international community.
One of the most important questions one should ask with respect to the East African budgets is whether the priorities of the government match the expectations of their citizens? Infrastructure is the clear winner with an estimated $6 billion in expenditure for the entire East African budget, followed by education, health and agriculture. Agriculture expenditure is the least in the region across these four main sectors.
$34 BILLION FOR WHOM?
What is clear throughout the region is that social services have not been a priority. For some countries, even, healthcare spending has been too low to meet the demand. For example, in Tanzania healthcare spending is far less than the World Health Organization recommendation.
There are key issues within the four budgets presented to the public by the East African governments that demonstrate a deferral in prioritizing the needs of the poor and vulnerable. In Tanzania the lack of investment in the health and education sector, in Kenya the proposed changes to the VAT caused a significant uproar, a lack of addressing issues of the youth and women unemployment in Rwanda, and an apparent disconnect in Uganda's vision from the demand required to improve development.
How sustainable is the apparant investment in infrastructure and hard issues going to last when the public sector in the region is under seige?
RWANDA'S EXPERIENCE HIGHLIGHTS THE RISKS OF DONOR DEPENDENCE
Although the United States and United Kingdom have reinstated its aid back to Rwanda, the experience Kigali faced over the summer forced it to think critically and innovatively about how it plans to fund its budget and continue implementing its poverty reduction strategy. The status quo is clearly not sustainable. In response, and in formulating its own resilence strategy, Rwanda launched a multimillion-dollar fund to raise capital for key development projects. Rwanda's Agaciro Development Fund will raise funds through voluntary means and 'well-wishers.' The main story here is that the 48% accounting of donor-funded support of the budget is unsustainable and Rwanda knows this. The real issue is whether regional governments are paying attention to the writings on the wall. The East African governments have hedged their bets on unmitigated support from Europe and the Eurozone crisis has shown that this strategy is no longer possible. Can Rwanda's innovative respons be replicated in East Africa?
THE NO 'BAIL OUT' PLAN
There is a significant fear that the excessive regional spending without sustainble forms of revenue, may bankrupt the region with no bail out in sight. Increased spending alone cannot stabalize an economy. The spending made by the region has also raised some red flags for the future. In an under the radar story, the East African Monetary Union (EAMU) Protocol ruled out any possibility of partner states bailing each other out in case of a financial crisis in one country. This agreement will have severe reprucssions in the future if the region finds itself in a financial crisis, which may occur in light of the spending and lack of diversified revenue stream.
The no bail out plan will eventually send governments in the region that do not have their fiscal houses in order into a panic when an economic crisis hits. As a result, social spending will be reduced affecting large masses of people. This will have severe effects on the poor and vulnerable population. Countries like Rwanda and Burundi will bear the brunt of such an outcome since Uganda, Tanzania and Kenya will be banking on revenues from the extractive industries, a serious gamble at the expense of the livelihoods of the poor and vulnerable. We talk about Burundi's predicament here.
BUDGETS HIGHLIGHT THE DISCONNECT THAT EXISTS BETWEEN THE GOVERNMENT AND ITS PEOPLE
When Mr. William Mgimwa, the Tanzanian Finance Minister presented the budget he stated that the government would create 71,756 jobs in education, health and agriculture sectors in FY 2012/2013. This was an important announcement but was not recieved positively. This is because of the context that the public sector in Tanzania has been facing throughout the year.
For many Tanzanians, it is hard to envision job creation in a health industry that just saw intense standoffs between doctors, interns and other medical staff with the government over salaries, equipment and working conditions. Where will the jobs come from if the government is unable to cater to the needs and demands of its current crop of employees? Across the region most people feel that the budgets do not reflect their needs and concerns. They understand that the governments are spending on infrastructure and believe that they will benefit in the long run. However, in the short run they will have to deal with food prices, inflation and an inefficient public sector.
Photo: Sustainable Sanitation