A workshop conducted by the International Monetary Fund (IMF) has warned East African Community (EAC) members against being reliant on donors and volatile commodity exports as the main sources of revenue.

The warning by the participants, who included representatives of the finance ministries and central banks in the EAC member countries, was contained in a statement issued by the IMF following a recent workshop on fiscal or budget-related risks held in Entebbe, Uganda.

The EAC members rely on commodities such as gold exports for Tanzania, while Uganda and Kenya are depend on tea, coffee and horticulture.

However, the prices of the commodities have tended to fluctuate wildly with the latest figures showing that global gold, tea and coffee prices are under pressure.

In the case of Kenya, donor contributions to national revenue have been unreliable with the middle of this fiscal year showing that less than half of the cash had been received.

“Participants discussed the potential risks to government finances in the region from a reliance on revenue from volatile primary commodity exports and uncertain donor grants,” said the IMF in a statement from its communications department in Washington.

The workshop was conducted by the Regional Technical Assistance Centre for East Africa and was attended by 20 officials from finance ministries and central banks from Burundi, Ethiopia, Kenya, Malawi, Tanzania and Uganda.

The participants were also concerned about fiscal risks arising from rapid increases in infrastructure spending, including through investments by state-owned enterprises and the use of public-private partnerships.

Uganda and Rwanda have lately had difficult relations with donors over governance issues while Kenya’s fiscal deficit of about eight per cent is above the six per cent recommended for a monetary union for the region.

The IMF noted that decentralisation was being pursued in the region, even though some risks for management of public finance remained.

Source: Business Daily

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