Rwanda to increase expenditure cautiously

KIGALI, RWANDA

Rwanda is increasing expenditure to Rf1, 116.9b in 2011/2012 financial year from Rf984b in 2010/2011 to continue supporting social and economic stability.

In terms of Gross Domestic Product (total value of goods and services) share, the new budget represents 28.7% of GDP, and it is only two-percentage points increase compared to the 2010/2011 budget.

Although the expenditures are going high, the government is amply trying to spend within its means. This is demonstrated in the cutting of budget deficit.
The overall cash deficit is projected to decline from Rf155.1b ($262.5m) in 2010/2011 to about Rf96.8b ($163.7m) in 2011/2012 budget.
The government intends to bridge the gap by borrowing less from domestic sources to avoid crowding out the private sector and high from external sources.

Finance and Economic Planning Minister John Rwangombwa said that the budget constitutes Rf576b or 51.6% domestically mobilised resources and Rf540.9b or 48.4 percent externally sourced financing.
Expenditure on running the government represents the lion’s share with resources amounting to Rf578.9b or 51.8% of the total expenditure.
However, the government never announced any salary increase as it manywere expecting.

Recurrent expenditure is therefore up in terms of value and down in terms of the total budget share compared to Rf550.1b in the 2010/2011 budget, which was 55.9% of the total budget.
Money that is invested in projects with critical mass impact on development or capital expenditure is estimated at Rf503.4b or 45.1% of the total budget.
This is again an increase of five percentage points compared to the 2010/2011 development budget, which was Rf393.9b.  The government seeks to invest heavily in agricultural infrastructure, energy and transport.
In sectoral allocations, infrastructure in general claims a bigger share.
In the education sector, Rwangombwa said Rf170.5b has been allocated compared to Rf155.7b in 2010/11 financial year, meaning an increase of about 10%.

The budgetary allocation to the health sector is up by about 35% to Rf131.9b from Rf97.4b in 2010/11 financial year.
Agriculture, which contributes at least more than a third of Rwanda GDP, has seen a shy increase in funding.
The sector, which employs at least 80% of Rwanda’s active population, is getting Rf67.1b from Rf64.4b in 2010/11 financial year, representing an increase of about 5%.
In the Communication sector, Rf25.7b has been allocated compared to Rf 29.4b in 2010/11 financial year. This reduction is related to completion of the national fibre optic spanning 2300km across the country. It is now ready for use.

The transport sector, one of the sectors attracting the government attention is taking Rf 75.2b compared to Rf 61.6b in 2010/11 financial year, accounting for an increase of about 22%. This will see more roads repaired and nearly new ones created.

The energy sector, which is on the government priority, is claiming Rf98.6b which is about 30% increase compared to Rf 75.8 in 2010/11 financial year.
This will see more Rwandan households get electricity and new sources of power such as geothermal will be developed.

Trade and Industry sector, which is currently facing turbulent commodity prices such as food and petroleum products, is getting Rf35.2b compared to Rf55.5b in 2010/11 financial year.
This reduction is explained by separation of Rwanda Development Board (RDB) from the Ministry of Trade and Industry.

In social protection and governance, the government intends to spend Rf48.3b compared to Rf40.6b in 2010/11 financial year, accounting for an increase of about 26%.
This is aimed at cementing more reforms in public financial management practices and physical decentralisation by taking services closer to the citizens.

The government also announced a number of tax measures but the most pleasing one is reduction of tax on fuel by Rf100 per litre in the course of the entire financial year.

This is aimed at containing high fuel retail prices to curb inflation, which is mainly arising from high food, rent and transport costs as well as fuel prices. The treasury will lose Rf14.1b worth of tax on fuel.
T

he Minister said GDP is expected at 7% but he said ‘this year 2011 is already proving to be a difficult year for our economy.’ This is linked to high inflation.

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