PFM Reforms in the East African Community

Posted by Fazeer Rahim, Amitabh Tripathi and Paul Seeds[1]

The regional integration process in the East African Community (EAC)[2] has provided an opportunity for furthering PFM reforms amongst the partner states. The East African Monetary Union (EAMU) Protocol signed in November 2013 requires the partner states to harmonize their PFM laws and practices. It also requires the development of a regional surveillance framework to oversee macro-fiscal convergence ahead of the proposed monetary union in 2024. The EAC Secretariat plays a coordinating role to ensure that the key PFM directives are implemented and the monetary and financial cooperation requirements in the protocol are complied with.

To harmonize PFM and fiscal reporting in the run-up to monetary union, the EAC Secretariat has been collaborating with the IMF’s Fiscal Affairs Department (FAD) and the East African Regional Technical Assistance Center (East AFRITAC). The EAC’s fiscal surveillance action plan, for example, requires all the partner states to undergo a Fiscal Transparency Evaluation (FTE). So far FTEs have been carried out for Kenya (2014), Tanzania (2015), Uganda (2017), and one is planned for Rwanda (2019).

In addition, since 2013, the EAC Secretariat, FAD and East AFRITAC have organized annual PFM workshops for ministries of finance and statistics bureaus. These workshops take stock of progress in PFM harmonization, update partner states’ PFM reform action plans, and support the EAC Secretariat in improving the framework for regional fiscal surveillance. The partners report annually on their progress on macro-fiscal convergence through Medium-term Convergence Programmes (MTCP) that are submitted to the EAC Secretariat and presented at the Sectoral Council on Finance and Economic Affairs (composed of the partner states’ Finance Ministers).

The EAMU Protocol has built a growing consensus amongst key stakeholders on the content and urgency of reforms, notably the harmonization of fiscal reporting and budgetary frameworks. Significant advances have been made in the following areas:    

Further work, however, is required towards meeting the goal of regional harmonization. Areas that need to be addressed include improving the credibility of medium-term budget frameworks, strengthening commitment control and cash management to prevent the incurrence of expenditure arrears, and timely and comprehensive in-year reporting on budget execution. Partner states have also been updating their public investment plans (PIPs) and improving other aspects of public investment management.

The current arrangements would benefit from stronger coordination between the EAC Secretariat and ministries of finance in monitoring progress on harmonization and supporting follow-up activities. For example, formal submission of updated PFM action plans could be required as part of the MTCP, with these action plans being integrated with the medium-term PFM reform strategies adopted by the partner states.

[1] Fazeer Rahim is a Senior Economist at the IMF’s Fiscal Affairs Department, and Amitabh Tripathi and Paul Seeds are Resident PFM Advisors, East AFRITAC, Dar es Salaam.

[2] The member states comprise Burundi, Kenya, Rwanda, Tanzania, Uganda and South Sudan (which joined the EAC in April 2016).  

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