Budget deficits plague East African nations

East African economies are navigating a challenging financial landscape as budget deficits loom large, threatening to impact crucial spending priorities for the upcoming financial year. The region is grappling with a confluence of factors, including escalating interest rates and a continuous depreciation of local currencies. CNBC Africa's Godfrey Mutizwa sat down with Kaneja Amani from Standard Bank Group to delve into the fiscal dynamics shaping the East African nations. Amani shed light on the key themes and trends emerging from the recent budgetary developments in the region. The discussion centered on the fiscal performance of Uganda, Tanzania, and Kenya for the 2022-2023 financial year. Amani highlighted the significance of this budget as the first post-COVID, signaling expectations of economic recovery and enhanced productivity. However, he also pointed out the implications of transitioning out of the Debt Service Suspension Initiative, leading to increased debt servicing costs. Despite these challenges, Uganda and Tanzania showcased robust revenue mobilization, meeting targets for tax and non-tax revenue. Amani commended the prudent expenditure management in these countries, with spending aligning closely with budgeted figures. In contrast, Kenya faced setbacks in tax revenue generation, domestic borrowing, and fund mobilization, underscoring the need for enhanced financial discipline. The interview delved into Kenya's unique debt story, emphasizing the critical importance of debt sustainability across the region. Amani emphasized that the prevailing economic environment, marked by rising dollar rates and constrained liquidity, has strained the ability of countries to access affordable funding. He highlighted the necessity for a reevaluation of investment returns and infrastructure spending to mitigate financial vulnerabilities. The conversation also touched upon the global calls for additional resources to address mounting debt distress in African nations, necessitating proactive policy interventions to avert fiscal crises. Amani underscored the imperative for governments to contain expenditure, prioritize essential social sectors like healthcare and education, and enhance tax revenue mobilization to shore up their fiscal positions. The discussion turned to the challenges in accessing capital markets amidst the current high interest rate environment. Amani noted the limited attractiveness of international bond markets for African countries due to prevailing risk perceptions. As a trader, he highlighted the importance of optimizing domestic borrowing while maintaining prudent debt management strategies. Amani expressed cautious optimism for investment opportunities amid the evolving financial landscape, citing favorable rates in Uganda and potential prospects in Tanzania and Kenya. Despite the complexities of the market, Amani remained hopeful for fruitful trading avenues driven by higher yields and strategic investment decisions. The interview concluded with reflections on the critical role of East Africa in driving the continent's economic growth, underscoring the significance of addressing budget deficits and enhancing financial resilience in the region.