29 January 2016

Rwanda: Budget Revised Up By Rwf40 Billion

The Government has presented to Parliament a revised National Budget for the Financial Year 2015/16, indicating an increase of Rwf40.6 billion.

The Budget Estimates for the financial year now stand at Rwf1,808.8 billion, up from the Rwf1,768.3 billion passed in June last year.

Tabling the revised Budget Estimates before Parliament, yesterday, Finance and Economic Planning minister Claver Gatete said the revision would help expedite ongoing development projects, reduce the fiscal deficit and reliance on external financing.

"The revised Budget Framework for 2015/16 and the medium-term are in line with expected external pressures.

The objective is to increase domestic resource mobilisation while introducing more expenditure prioritisation to reduce the fiscal deficit and reliance on external financing over time," Gatete said.

The revised Budget Estimates will be endorsed by lawmakers after scrutiny by parliamentary commission in charge of budget.

Gatete said the increment in the Budget will be supported by additional Rwf18.4 billion loan from the World Bank for social protection programmes and Rwf15.9 billion DFID loan for education programmes.

The minister said allocation of more resources to key priority programmes and projects also necessitated budget revision to cater for spending shortfalls.

Fiscal performance and inflation

Minister Gatete told lawmakers that consistent with this revision, the 2015/16 budget forecast an overall deficit of 5.3 per cent of gross domestic product (GDP), declining to 4.4 per cent of GDP in 2016/17 and further to 4.2 per cent of GDP in 2017/18.

Despite external shock that was anticipated earlier due to falling mineral prices across the world, Rwanda's economic performance slightly depreciated from 7.2 per cent in the last fiscal year to 7 per cent in the current financial year.

Gatete said this did not, however, affect headline inflation (economic total inflation) and core inflation (volatility of market prices), which stands at 4.5 per cent and 3 per cent, respectively.

The National Bank of Rwanda has constantly worked to keep inflation below 5 per cent target.

This, according to Minister Gatete, keeps Rwanda's economic performance vibrant compared to regional economies that have been registering double digit inflation.

"The highest headline inflation rate we have had was 4.5 per cent last December, but the average of that in the whole year stood at 2.5 per cent," he said.

Budget resources, expenditures

As of July-December 2015, the Budget resources had put provisional figures of the total revenue and grants at Rwf721.6 billion compared to Rwf748.5 billion projected for this period, a shortfall of Rwf26.9 billion due to delays in reimbursement of donor funds specifically the European Union.

However, the domestic revenues exceeded initial targets by Rwf2.9 billion (Rwf519.6 billion to Rwf522.5 billion) owing to better revenue performance and collection of arrears.

Gatete told Parliament that, so far, the total expenditure and net lending for the July-December 2015 period was estimated at Rwf845.9 billion comprising Rwf441.4 billion of recurrent spending; Rwf328.6 billion domestic capital and Rwf76 billion for net lending.

Net lending, however, was lowered by Rwf26.5 billion on Kigali Convention Centre project because the money was spent before the start of a new fiscal year2015/16.

Budget for elections

In the revised Budget, current expenditures stand at Rwf891.2 billion, an increase of Rwf14.4 billion.

Minister Gatete said this was due to increase in expenditure to agencies like National Electoral Commission to cater for referendum and local Government elections which received Rwf3.0 billion.

Additional Rwf4.3 billion has also been earmarked to cater for the salaries of new teachers to be recruited, Rwanda National Police, Ministry of Defence, Workforce Development Authority and National Agriculture and Export Board, while Rwf3.7 billion will cater for operations in Rwandan diplomatic missions abroad.

Additional development projects

The development budget, which was at Rwf747.2 billion, has been revised upward to Rwf776.3 billion, showing a net increase of Rwf29.1 billion.

The minister said the increase will benefit mainly projects and programmes in health sector at the tune of Rwf15.6 billion Global Fund money carried forward from 2014/15.

In other additional funding, Rwf0.6 billion will go to CCTV project, Rwf0.4 billion to Rwanda Agriculture Board for the purchase of livestock for One Cow Per Poor Family programme, and Rwf0.3 billion to Natural Resources ministry for mineral exploration project and other key government projects.

In their reactions, parliamentarians commended the growth in revenue collection but asked the government to establish viable strategies to cushion the economy against external shocks, citing falling mineral prices at the global market.

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