The New Times (Kigali)

14 February 2013

Rwanda: Government Revises Budget Up 12 Per Cent

Members of parliament yesterday approved a government proposal to increase the national budget by nearly 12 per cent to stabilise the country's economy in the next three months that remain before the end of the 2012-2013 fiscal year.

The Rwf1,385.3 billion budget which was initially approved by parliament for the fiscal year 2012-2013 should be revised upwards to Rwf 1,549.9 billion.

This is due to current world economic prospects, suspended aid, and investment priorities in the next three months, the Finance Minister told parliament yesterday.

Presenting the bill seeking to modify the current budget law, Minister John Rwangombwa, said the cabinet has proposed a net increase of Rwf 164.6 billion to the original budget.

He said the country has projected additional resources worth Rwf 227 billion from Euro bond proceeds accrued from a sovereign bond issued to European markets, which the government will invest in its major business projects and eventually mitigate the gap left by aid cuts.

The minister said the Euro bonds funds will especially be on-lent as soft loans to Rwandair and the Kigali Conference Centre (KCC). He said both projects will help the country attract foreign currencies because the funds will help Rwandair to end existing expensive debt while the KCC project will be completed to boost events tourism in the country.

"Both projects are very important," the minister told the lawmakers.

The original budget faced a reduction of Rwf 62.4 billion in aid cuts and aid suspension made by development partners in the budget's first semester last year, the minister said.

The government has proposed to make cuts on the original budget proposal targeting "mainly the budget items that will not significantly affect service delivery" and to maintain projects that are key to the country's economic performance such as energy infrastructure and many projects in productive sectors at the level of local governments.

The first sector to feel the pinch of the freeze is education since recruitment of new teachers for 2013 will also be largely based on receipt of World Bank and AfDB budget support funds that the government hopes to receive next month.

Expected delays and possible postponement of donor support funds are about Rwf 107.6 billion in total, which are aid funds that the government still hopes to get from multilateral and bilateral donors.

"We will continue to engage the donors in constant discussions aimed at getting the contingent funds disbursed," the minister said.

The government had initially estimated its regular expenditures, including net lending at Rwf 737.9 billion for the original budget but it is proposing to increase the expenditures to Rwf924.3 billion after it figured out an increase of Rwf 186.4 billion from the Sovereign Bond will happen.

But the original domestic capital spending was reduced by 7.2 per cent, from Rwf 277 billion to Rwf 258.2 billion, which is a reduction of Rwf 18.8 billion.

"This reduction will affect mostly new projects that will be postponed. In addition, implementation of some on-going projects will be slowed down and in some cases put on hold pending availability of contingent grants," Minister Rwangombwa says.

The minister said that uncertainties in the global economy with the threat of economic slowdown pose risks to the country and could potentially have adverse effects on the economy and budget implementation.

But he remained optimistic that the country's economy will remain somehow stable, maintaining that it will grow 7.1 percent during this fiscal semester instead of the previously projected 7.2 per cent.

MPs react to revision

But they also asked the government to initiate measures to ensure more effective management of public funds as Rwanda clearly moves forward with austerity measures and floats its treasury bonds to attract capital.

For MP Abbas Mukama, the Deputy Chairperson of the parliamentary Standing Committee on National Budget and Patrimony, the government will need to prepare public servants for a better management of public funds because they are going to have to spend money to implement planned activities in just a few remaining three months of the 2012-2013 fiscal year.

"These treasury bonds will be paid by tax payers' money. There is need to carefully use public funds, no extravagance," he cautioned.

For MP Juvenal Nkusi, chairperson of the Parliament's Public Accounts Committee, the government needs to have in mind that the same donors who suspended aid to Rwanda might still block release of funds by World Bank and AfDB because they own a lot of shares in both organisations.

"Aren't the development partners in their boards going to still refuse the release of funds?" he wondered.

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