By Business Guide writer
The East African Community ministers of Finance may have just delivered perfectly pitched budgets from a behavioral economics point of view. The budgets have a set of measures which neatly “nudge” their people across the broad spectrum of the economy toward the government’s twin goals of jobs and growth.
The governments – and specifically these budgets – set up what behavioral economists would call the “choice architecture” within which East African business and consumers will make decisions.
US academics Richard Thaler and Cass Sunstein explain choice architecture in their 2008 book “Nudge: Improving Decisions about Health, Wealth, and Happiness” as follows:
Decision makers do not make choices in a vacuum. They make them in an environment where many features, noticed and unnoticed, can influence their decisions. The person who creates that environment is, in our terminology, a choice architect.
East African Community (EAC) member states have prioritized development expenditure as countries look to further strengthen the growth agenda of the regional economies.
In the national budget estimates presented, the regional bloc’s biggest economy, Kenya, will be spending $22.8 billion, Tanzania $13.5 billion, and Uganda $12 billion during the next financial year that starts on July 1.
Rwanda plans to spend some $2.49 billion in the fiscal year 2016/17. Burundi budget reading is not aligned with that of the EAC bloc.
While presenting the budget speech, Kenya’s Finance Cabinet Secretary Henry Rotich, said the 2016/17 budget will focus on infrastructure development, agriculture, including agro-processing to spur the country’s growth, among others. The minister also abolished tea and sugar development levy.
The energy sector got Ksh39.9 billion, standard gauge railway (Ksh228.5 billion) and roads got Ksh147.6 billion.
In Tanzania, Minister for Finance Phillip Mpango indicated that the new budget is focusing on alleviating challenges of people in low-income groups, and setting the foundation for middle-income country.
In a country, where the national debt reportedly stands at $20.94 billion as of March, programmes geared at supporting development were allocated 40 per cent of the total budget, an increase from 25 per cent this fiscal year.
Among others, the Tanzanian government intends to borrow Tsh7.4 trillion from domestic revenue to fill the gaps of the fiscal year 2016/17.
The government will also spend another Sh17.7 trillion on operational costs and Sh11.8 trillion for development.
Over Tsh4.77 trillion or 22.1 per cent of the total budget has been allocated to the ministry of Education. The minister announced tax increases on spirits and locally-produced beer brands. About Tsh18.4 trillion or about 62.5 per cent of the budget will be raised from domestic revenue.
Uganda’s 2016/17 will seek to strengthen gains made this financial year by funding energy and transport infrastructure projects, as well as programmes that spur job creation.
Ugandan Finance minister Matia Kasaija presented under the theme, “Enhanced productivity for job-creation” a total UGX26,361 billion ($12 billion).
Kasaija said the commercialization of oil and gas resources is one of the key objectives of the government next fiscal year.
As such, the government has allocated Ugsh188.2 billion to implement programmes for oil and gas development.
However, the Works ministry was allocated Ugsh3.7 trillion, the biggest share of the country’s 2016/17 fiscal year budget.
It is followed by the Education sector with Ugsh2.7 trillion and the Energy sector with Ugsh2.4 trillion.
The minister slapped a 400 per cent tax increase on personalized car number plates.
The minister also increased the agricultural sector’s budget by Ugsh343.46 billion to Ugsh823.42 billion to promote commercial and modern farming practices in a country where agriculture sector is key growth driver.
Where the 2015/2016 budget appeared to shock and disappoints the community with broken promises and tough measures in most of the east African countries, the 2016/2017 budget unveiled by Finance ministers seems to be the very antithesis of their Government promises.
The 2015/2016 budget saw consumer confidence collapse as a result of these tough measures; this 2016/2017 document looks to deliver stimulus, and confidence in all the right places.
With the exception of negative gearing, the budget seeks, and appears to hit, all the hot buttons currently top of mind for Ugandan consumers and business.
The budget plans to deliver (on its own figures)
- Energy and transport infrastructure projects.
- Enhance agriculture modernization and value addition to boost exports
- Enhance education and create Jobs
These measures will give confidence to two of the economy’s big engines of growth: households and small business. It may also have a multiplier effect insofar as the very businesses that are get the fillip from the government are also in aggregate responsible for a employing a large proportion of Uganda’s workforce.
While these measures deal with business and consumers here and now, other measures, such as clamping down on multinational tax avoidance, and reducing superannuation benefits for Uganda’s top earners appear to address elements of unfairness that are embedded in the tax system.
That will in turn encourage consumers and business that the economy and the government are on the right track.
No budget can ever please all people all the time and the opposition is already characterizing these documents as one that favors the rich and business as usual