EAC govts raise spending by 20%
East Africa Community countries raised budget spending by 20 per cent for their 2012/13 fiscal year with an eye to creating more jobs as five Finance ministers on Thursday warned of a cloudy economic forecast that could leave businesses and households reeling from inflationary pressure.
After Kenya, Uganda, Tanzania, Rwanda and Burundi navigated through yet another turbulent year, the bloc’s Finance ministers walked a tight rope as they sought a policy and fiscal mix that would lift the economies in the wake of threatened revenues, high food and fuel prices and feeble currencies.
It is such pressures bundled with a surging unemployment rate that has forced their governments to sharply raise spending for the coming financial year, but also sent economies into their biggest budget deficits ever.
Kenya, Uganda, Tanzania and Rwanda raised their combined spending from $26.6 billion in the current financial year to $32 billion in budget spending plans released concurrently by the bloc’s finance ministers.
Kenya’s total budget stands at $16 billion, up from $12.9 billion while that of Uganda is $4.4 billion (Shs11.1 trillion) compared to last year’s $3.6 billion. Tanzania will spend TShs15 trillion ($9.5 billion), a rise from TShs13 trillion ($8.2 billion) compared to 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 vital social services like health and affect the standards of living in the countries.
EAC member countries have also allocated a huge chunk of their budget to infrastructure as well as social welfare projects.
The risk of a widespread slowdown in the region still looms large with ministers citing the ongoing economic troubles in Europe as a key threat to trade and investments.
Statistics show that while governments across East Africa have been pumping billions of dollars into job creation initiatives, unemployment remains one of the biggest headache.
Uganda budget at a glance
Total budget is Shs11.1 trillion ($4.4 billion).
• Ugandan Excise Duty on spirits made from locally made raw materials increases from 45 per cent to 60 per cent
• Shs290 billion ($115 million) salary increase for teachers, scientists and other civil servants
• Salary increases for Primary School Teachers, and Science Teachers in Post O-Level institutions
• Govt to undertake rehabilitation of windmills in Karamoja region to address constraints in water for production
• An additional 10 per cent income tax imposed on individuals with chargeable income of Shs120 million and above, per year
• PAYE threshold increased from Shs130 billion ($51 million) to Shs235 billion ($93 million) per month and the tax bands will be adjusted accordingly.
• Budget to support anti-corruption agencies to tackle corruption in all government agencies
• Public sector efficiency and effectiveness of service will be of paramount importance starting next financial year
• 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 licences which were found to be either obsolete or redundant.
• Establish a one stop centre to provide online registration services for the various licences 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 PAYE threshold will be increased from Shs130,000 to Shs235,000 per month and tax bands will be adjusted accordingly.
• The 18 per cent VAT on water reinstated. This measure will generate Shs21.7 billion
Excise duty on spirits made from locally sourced raw materials increased from 45 per cent to 60 per cent.
• An ad valorem duty rate on undenatured spirits of Shs2, 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
By Mwaura Kimani, Daily Monitor
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