23 September 2018

Rwanda: How Rwanda Keeps Wages, Spending Low

Photo: The Guardian

Rwanda has kept its wages and salaries below 18 per cent of the budget, as part of measures to cut the costs of running government institutions.

"Salaries and wages are well controlled and represent only 18 per cent of the budget," said Uzziel Ndagijimana, Minister of Finance. "They increased slightly because of the creation of new institutions and promotion of some staff."

He said keeping recurrent expenditure low is one of the reasons Rwanda's debt distress is low.

Rwanda has borrowed heavily in recent years to finance infrastructure programmes, contributing to an increase in external public debt to 37.5 per cent of GDP in 2017 from 16.4 per cent in 2012.

But its debt sustainability analysis indicates low risk of debt distress, according to the International Monetary Fund. However, the country increased its budget spending by 7 per cent in the 2017/18 fiscal year to Rwf2.09 trillion ($2.58 billion).

Only 17 per cent of this budget is funded by donors, while about Rwf362.8 billion is borrowed from external lenders.

A development-centred budget has enabled Rwanda realise 26 per cent of the targets stipulated in its Vision 2020. Some of those achievements are increasing agricultural production, reducing infant mortality and malaria deaths, and increasing secondary school transitional rates.

However, even though its external debt burden remains below risk thresholds, it is expected to balloon in 2023 when the Eurobond issued in 2013 matures.

Proceeds from the $400 million Eurobond were in part used to repay a debt owed by national carrier RwandAir, which is still struggling to make a profit.

Despite this, the government is confident that the services RwandAir offers to the economy make up for its lack of profitability.

"Actually RwandAir is profitable in the economic sense. What we target is not profits from the company itself but the impact it is having on the economy. Our exports are growing because our connection with other countries is expanding and tourism is expanding. This is the kind of strategy we are looking at with RwandAir," Mr Ndagijimana said.

Rwanda also has the lowest government corruption level in the region and on the continent, a factor that has ensured that funds meant for development projects are not embezzled.

The country has some of the harshest anti-corruption laws and regulations in the region, including tapping phone lines of suspects, imposing severe fines and publicising the names and families of people convicted of the crime.

Prosecutors won 289 corruption-related cases between June 2017 and June 2018, up from 121 in 2016, and several individuals were jailed.

The Auditor-General's Report for 2017 showed that various agencies have ghost debtors and creditors, while their budgets have significant balances that are omitted from financial statements.

A total of 16 accounts, valued at Rwf638 million ($0.73 million) were omitted from the financial statements of six institutions, including the Rwanda Social Security Board, University of Rwanda, Rwanda Energy Group and four district hospitals.

President Paul Kagame last Wednesday upped the ante on parliamentarians, asking them to bring to book heads of institutions mentioned in corruption scandals in the Auditor-General's report.

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