Kenyan's Mwai Kibaki promises an end to misrule

In Kenya, the budget is the first under the new Rainbow Coalition (NARC) government, which took over after a landslide victory in December after 39 years under President Daniel arap Moi's Kanu party.

Commitments to spend more on roads and schools made by the party - in the hope of turning around what it said was four decades of misrule - mean expenditure will swell to 334.1bn shillings in July 2003-June 2004, up 20% on the previous year, Finance Minister David Mwiraria told Parliament.

In Uganda, meanwhile, the government unveiled a string of tax waivers to boost export industry, while raising consumption taxes in the hope of increasing revenues overall.

But the budget's projected spending remains almost twice the projected tax take, as the economy is still heavily dependent on money from donors.

Tanzania, meanwhile, looks set to introduce sweeping farming subsidies to fight the damage wrought by the drought afflicting all of southern Africa, despite opposition from the International Monetary Fund.

Louder than words

Kenya's new President, Mwai Kibaki, won the December poll on promises to end rampant corruption and economic mismanagement, so Thursday's budget, observers said, presents an opportunity to match actions to rhetoric.

Delays in passing anti-corruption legislation - although it is now firmly on the statute books - means the budget is being written to exclude help from the IMF, said Razia Khan of Standard Chartered Bank.

"As such, the size of the projected fiscal deficit, given the vast promises of the NARC government, will be a focus," she said in a note to clients.

In the event, the deficit grew in 2002-3 to 4.6% of GDP from 3.1% the year before, a situation blamed by Mr Mwiraria on debts piled up by the previous government.

Uganda's Yoweri Museveni faces security troubles

"I would say that the measures I have indicated today are but the first step in a long journey," he said.

"We have a long way to go before we can restore this great nation to prosperity."

While VAT was reduced to 16% from 18%, higher duty on mobile airtime should help boost the overall tax take by 10% to 240bn shillings, he said.

Although growth is set at just 2% this year - still an optimistic figure, many economists believe - the government is targeting 4.7% average annual expansion over the next five years to try to create 500,000 jobs a year.

Security concerns

Meanwhile, Ugandan Finance Minister Gerald Sendaula was telling the Parliament in Kampala that the Ugandan deficit would be steady at about 11.1% of GDP.

Growth, he said, would be 5.6% in 2003-4, up from 4.9% in the current year, as agricultural production recovered.

But with a huge informal sector, heavy defence spending to cope with war in the Democratic Republic of Congo and rebel activities in the north and east of the country, expenditure is growing to 24.3% of GDP from 23.3%, while revenues are set to grow to 13% of GDP from 12%.

Tanzania's Benjamin Mkapa must deal with tax troubles

The gap is unlikely to be helped thanks to the prospect of an East African Customs Union due to come into force next year.

Both Tanzania and Uganda rely heavily on customs duties and must find ways of plugging the gaps in their finances once the union comes into effect.

Subsidies

In Tanzania, plans to spend heavily on agricultural subsidies figured high in Thursday's budget - despite opposition from the IMF - since the farming sector supplies half the country's output and most of the jobs in its 34 million-strong population.

"There is a big dispute with the IMF on subsidising agriculture, but I will deal with them," Finance Minister Basil Mramba said.

Heavy taxation of legitimate businesses - given the size of the parallel economy - is unlikely to change, economists said.

"VAT collection has not been as good as the government expected until this year," one Deloitte & Touche analyst told Reuters.