EAC Adopts New Funding Formula to Ease Burden on Smaller Economies

East African Community leaders have adopted a new financing formula for the regional bloc that will require member states to contribute half of the budget equally and the remainder based on the size of their economies, according to a communiqué issued after their summit in Arusha.

The new model replaces a system that largely required equal contributions from partner states, a structure that had increasingly drawn criticism from smaller economies that were required to pay the same amount as larger ones such as Kenya and Uganda despite their smaller fiscal capacity.

Under the revised framework, partner states will each contribute 50 percent of the community’s budget equally, while the remaining 50 percent will be calculated based on economic indicators including the size of a country’s economy.

EAC leaders pose for a photo last year during the signing of the Treaty. Image: courtesy.

Leaders said the move was aimed at making the bloc’s financing system fairer and more sustainable as the community expands and takes on more programmes.

The issue of funding has become a persistent challenge for the Arusha-based organisation, with delays in remittances from member states creating significant budget gaps that have disrupted the operations of some of the bloc’s institutions and programmes.

Outstanding contributions from several member states have in recent years forced the community to scale back activities and delay payments to staff and regional institutions.

The summit agreed to partially waive accumulated arrears owed by some countries on condition that the remaining balances are settled within a set timeline, in a move aimed at easing the financial burden on governments struggling to clear their dues.

Regional officials said the new contribution formula is expected to improve compliance and ensure more predictable financing for the organisation.

The East African Community currently comprises Burundi, the Democratic Republic of Congo, Kenya, Rwanda, Somalia, South Sudan, Tanzania and Uganda and is working towards deeper economic integration including a common market and, eventually, a political federation.

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