18 February 2013

Rwanda Bails Out Airline

Parliament in Rwanda is set to allow the central Government to spend an extra RWF164billion in the last three months of the fiscal year in order to reportedly keep the economy on track.

The proposed additional expenditure by the government, the Finance Minister John Rwangombwa told legislators will increase the original budget estimates from RWF1385.3billion to RWF1550.0billion.

The addition results in a 12% increment in expenditure.

While appearing before the plenary session of the Lower Chamber of Parliament on Thursday afternoon, Minister Rwangombwa explained that the original 2012/13 Budget approved by Parliament was RWF 1385.3 billion but he now proposes to revise it upwards to RWF 1549.9 bn.

It's a proposal that would surprise many outside Rwanda considering the country is reeling with financial holes following suspended or cut aid from donors following accusations that Kigali is funding unrest in neighboring DRC.

The resources allowed Kigali to increase net lending from the original Rwf 737.9 bn to the now proposed Rwf924.3 bn with most of the new resources expected to come from the sovereign bond issuance that's is thought to be worth over Rwf 185 bn.

The main beneficiary of the new spending will be RwandaAir, the national carrier which is reportedly being burdened by a very expensive loan and now is set to be bailed out. Another beneficiary will be the behind schedule Kigali International convention centre which will also get funding to accelerate its completion. The multi-million dollar project is expected to be a major attraction for conference tourism and government is keen on seeing it completed to achieve just that.

RwandAir, the national Airline is struggling to remain competitive amidst heavy competition from new international entrant and the bailout is seen as a relief to help the company re-strategize its operations.

"We at BNR see it as a prudent investment in the future and one which is definitely good for the economy," said Claver Gatete, the governor of Rwanda's Central Bank during an interview with the EABW on Friday last week.

While Rwanda voted to lend to these two projects, it was also making sure it ran a tight hand on other elements of the budget putting in mind the reduced aid revenues.

The soft loans to RwandAir and the construction of the convention centre will see government's net lending increase from RWF22.0bn to a staggering RWF170.5billion representing an increase of RWF148.5bn.

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