Rwanda's Minister of Finance and Economic Planning Claver Gatete. PHOTO | CYRIL NDEGEYA
What you need to know:
Rwanda is looking to raise $104.9 million through domestic borrowing and $301.4 million through external borrowing in the new financial year.
Kenya’s Treasury Cabinet Secretary Henry Rotich forecast a 2015/16 budget deficit of 8.7 per cent of GDP, up from 7.8 per cent last year.
Uganda’s deficit has risen to 7 per cent of GDP, up from 4.5 per cent in the 2014/15 year.
Tanzania’s 2015/16 budget has increased by 13.3 per cent to $10 billion.
Regional economies are looking to external borrowing to bridge large budgetary deficits.
Kenya, Uganda and Tanzania all saw an increase in budget deficits from last year. Rwanda’s budget deficit for the 2015/16 financial year dropped to 4.6 per cent from 5.2 per cent, to stand at $406.2 million down from $414.1 million.
Rwanda is looking to raise $104.9 million through domestic borrowing and $301.4 million through external borrowing in the new financial year. The country still has $83 million from the Eurobond.
Rwanda’s budget has risen to $2.58 billion; 34 per cent will be financed through external borrowing and funding. External loans will increase by $32.2 million to $330 million.
Finance Minister Claver Gatete said external resources are estimated at $832 million, a reduction of $50.1 million from last year.
“We are estimating a reduction in grants by $82.3 million to $501.9 million in the current financial year,” Mr Gatete said.
Kenya’s Treasury Cabinet Secretary Henry Rotich forecast a 2015/16 budget deficit of 8.7 per cent of GDP, up from 7.8 per cent last year.
Razia Khan, the Africa economist at Standard Chartered Bank, said Kenya should be seeking lower deficits.
Mr Rotich said the country will rely on external concessional financing, and look to international markets as it did with its 2014 Eurobond.
“We intend to continue sourcing these types of funds, including from export credit agencies and syndicated loans project grants, debt swap, commercial financing, domestic deposits and domestic borrowing,” Mr Rotich said.
PKF Kenya partner Michael Mburugu said the international market is not as liquid as it was last year during the issuance of the bond.
Rising deficit in Uganda
Uganda’s deficit has risen to 7 per cent of GDP, up from 4.5 per cent in the 2014/15 year. The budget is now $7.4 billion, from $4.39 billion last year.
Uganda’s Finance Minister Matia Kasaija said to avoid more expensive domestic borrowing and reduce the fiscal burden of debt payments over the medium term, a larger share of the fiscal deficit will be financed by external loans.
“We will continue to pursue concessional loans as the preferred means of meeting our external financing requirements. We have allocated $89.8 million for external debt interest payments in the 2015/16 financial year,” Mr. Kasaija said.
However, the country’s projected revenue collection is $3.4 billion, just 44.5 per cent of the budget. In the 2014/15 financial year, Uganda’s external debt was $4.5 billion. This is expected to increase by $1.4 billion to $5.9 billion.
Fred Muhumuza, an economist with KPMG Uganda, said the repayment structure does not favour the country.
“International bonds are cheaper because of their lower interest rates, but their lump sum payment within a short time is not feasible in Uganda. The best way to go is domestic borrowing,” Dr Muhumuza said.
Tanzania seeks credit rating
Tanzania’s 2015/16 budget has increased by 13.3 per cent to $10 billion. The country plans to bridge its deficit through a Eurobond later in the financial year. Finance Minister Saada Mkuya said talks between the government and Moody’s and Fitch Ratings on their credit rating have been concluded.
“We are preparing to issue a debut Eurobond worth up to $1 billion to finance infrastructure projects after securing our credit rating,” Ms Mkuya said.
Tanzania’s projected revenue collection is $5.5 billion; 45 per cent of the budget will be financed by borrowing externally and on the domestic markets. In just four years, Tanzania’s public debt has risen to 55 per cent of GDP.
