The government plans to spend an estimated Rwf5,690 billion in the fiscal year 2024/2025, an 11.2 per cent increase compared to the Rwf5,116 billion approved for the current fiscal year.
The Ministry of Finance and Economic Planning plans to allocate the budget to key sectors such as health, education, and agriculture, which are expected to boost the economy.
The government allocates the budget based on three pillars - economic transformation, social transformation, and transformational governance to deliver on the National Strategy for Transformation (NST).
Under the economic transformation pillar, the government plans to prioritise improving digital literacy among Rwandans, increase mining exports and export revenues from business tourism, as well as air transport traffic by supporting RwandAir.
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Domestic savings, and boosting agricultural productivity in terms of yields for priority crops, land under irrigation, use of quality seeds by small scale farmers, strategic food reserves, credit to agriculture and reducing the usage of biomass for cooking, are other key economic transformation priorities.
Under the social transformation pillar, Rwanda targets to reduce stunting among under 5 children, reduce maternal and child mortality rates, increase health facilities with access to water, and increase the ratio of nurses per population.
Under the same pillar, the government looks to increase trained teacher ratio in primary schools, minimum proficiency in numeracy in Senior 3, enrolment in Science, Engineering, Technology and Mathematics (STEMs) and in Technical and Vocational Education and Training (TVET), and reduce drop out across all educational levels.
Rwanda also plans to reduce backlog cases and recovery of embezzled public funds under the transformational governance pillar.
To achieve that, the government says it will source 60 per cent, or Rwf3.4 trillion of the proposed budget from domestic resources including tax revenue collection, which is in line with what the Minister of Finance Uzziel Ndagijimana termed as "budget self-sufficiency."
Angello Musinguzi, Senior Tax Manager at KPMG Rwanda, believes that the government's target to raise 60 per cent of the budget from domestic resources is a positive move, saying the country started collecting barely Rwf60 billion in 1997.
"This is a very huge achievement. Where revenue will come from, however, is still a big question for the Ministry of Finance," he observed, adding that wars in Ukraine and Palestine that have disrupted global supply chains, as well as the effects of COVID19 adds another layer of complexity to the challenge.
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To mitigate the shocks, Rwanda Revenue Authority (RRA) is automating its processes to ensure tax compliance. The Ministry of Finance is also trying to introduce tax amnesty which will encourage compliance through self-disclosures by the taxpayers.
Tax amnesty is where taxpayers who have not been audited by the tax authority can make self-assessment up to 2023 and report any taxes not declared, which saves them from paying penalties.
Musinguzi is convinced that the reduction of the corporate income tax rate from 30 per cent to 28 per cent will eventually see an increase in investment and compliance given that this is the lowest rate in the East African Community (EAC).
"The government should now think of reducing value added tax (VAT) to 16% as it is in Kenya in order to be competitive in the region. High tax rates do not increase tax base and compliance," he noted.
The remaining 40 per cent of expenditure will be met through external financing, with grants forecast to reach more than Rwf725 billion, or 12.7 per cent of the total budget, while loans will amount to over Rwf1.3 trillion, equivalent to 23.2 per cent.
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Fix agriculture
Out of the Rwf5.7 trillion that the government will spend in 2024-2025, agriculture has been allocated Rwf259.7 billion, health received Rwf438 billion, education Rwf941.8 billion, while transport and energy were allocated Rwf337.4 billion and Rwf294 billion, respectively.
Canisius Bihira, an agricultural economist based in Kigali, said the agriculture sector expenditure is significantly lower compared to how many people the sector employs, proposing that it should be increased.
"The agriculture sector employs almost 80% of the population. This is enough evidence to convince policymakers that the sector holds potential to transform the economy," he told this publication.
The increase in the budget to the agriculture sector would, among others, enable the training of young people into mechanization, improved irrigation practices, and terracing techniques thereby providing productive avenues for youth most of whom are currently idle with no any form of work.
"We can also introduce initiatives that lend to both small and large agri-businesses that are working to improve things like commercial seeding," he said, lamenting that government would be better off investing Rwf200 million in an agribusiness venture instead of buying expensive vehicles for Rwanda Agricultural Board (RAB) staff members.
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To address some of the complex challenges such as unpredictable and extreme weather conditions such as floods, landslides and droughts, the economist suggests building dikes and levees.
"To protect ourselves against floods, we can start building dikes and levees on major water bodies especially in regions such as Northern and Western Province that tend to experience floods," he said.
Dikes and levees are artificial barriers designed to control or hold back water. They are typically built from compacted earth, rock, or concrete with a primary purpose of preventing flooding.
"We also have an opportunity to install pumps on major water bodies such as River Akagera that can pump water into reservoirs for storage, which then can be used for irrigation in times of crisis," he explained.
Rwanda has generally been increasing its budget over the years, something that has put pressure on government finances. In order to reduce the high level of spending that has been observed over the years, the government will fund ongoing projects instead of necessarily introducing new ones.
With increasing pressure to deliver more services with fewer resources, the government is also looking for alternative sources of funding such as tapping capital markets and green financing.
