IN RWANDA, GOVERNANCE TOPS THE BUDGET PRIORITY AT $ 500 MILLION, A THIRD OF THE TOTAL BUDGET

THE EASTAFRICAN
By KEZIO-MUSOKE DAVID
June 15 2009

Rwanda’s budget for 2009/10 is Rwf838 billion ($1.5 billion), up by 24 per cent from last year.

With the government aiming to dramatically cut down dependence on foreign aid, some 50.9 per cent of the budget will be supported by the national coffers while the rest will be sourced from external grants and loans.

Minister of Finance and Economic Planning James Musoni, while presenting the budget to parliament in Kigali, proposed policy changes in the tax regime to mitigate losses that would result from Rwanda joining the EAC Customs Union.

The country will start implementing the EAC’s common external tariff (CET) from July 1, a move that will lead to a projected revenue loss of $21.5 million.

The proposed tax policy changes include the exemption of duty on equipment and inputs used in oil, gas or geothermal exploration.

Others are a reduction of import duty for yarn from 10 per cent to 0 per cent to promote the textile industry in the country and a reduction of the CET for kerosene stoves from 25 per cent to 10 per cent to protect the environment.

The budget also proposed duty exemption for heat-insulated milk tanks to promote the diary industry in Rwanda.

“It has also been decided to increase the excise duty on (telecoms) airtime from 3 per cent to 5 per cent as initially agreed with the players in the sector to progressively adjust upwards the rate rather than a one-off shift in the tax rate,” Mr Musoni said.

Mr Musoni said that the lion’s share of the budget allocations, some $501.6 million, or 34.5 per cent of the total spending, will be allocated to governance and sovereignty activities.

Mr Musoni said the second biggest chunk of the budget, some $330.1 million, will be allocated to infrastructure while other priorities like human development and production capacity will be allocated $468.8 million and $152 million respectively.

Rwanda’s 2009/10 budget is the first to be read in conformation to the East African Community budget calendar as agreed by a treaty signed by EAC Ministers of Finance in Nairobi on May 20.

This also means that the new budget shall run from July 1 this year to June 30, 2010.
To achieve the realignment, Rwanda’s parliamentarians recently adopted a law that allowed the government to run a $784 million mini-budget for the transitional period of six month from January 1 to June 30 this year.

Though emphasis in the 2009/10 spending has been placed on financing development projects to create more jobs and to generate growth, the share of capital expenditure has increased from last year’s allocation by 33 per cent.
The production sector, according to Mr Musoni, will emphasise agriculture supply, agri-business, land reform and promotion of value-addition for exports.

Rwanda posted an excellent performance in agriculture in the previous financial year, with a 15 per cent growth in food crop production as a result of improvements in the distribution of fertilisers, use of better quality seeds, planting techniques and land consolidation.

“This is in line with the recommended measures to mitigate the impact of the global financial crisis. Manufacturing and financial services sectors have also been given priority. The total budget set aside for this sector in the 2009/10 budget is $154 million,” Mr. Musoni said.

This budget, by supporting activities under human development, aims at improving human health and slowing down population growth.

With Rwanda making significant strides in schools enrolment, the money allocated under the vote for the education sector is aimed at improving the quality of the 9-year basic education, raising the completion rates and strengthening post-basic education.

To protect the most vulnerable members of society from the effects of the global economic crisis, the government will accelerate the implementation of the Vision 2020Umurenge Programme.

On Rwanda’s economic performance, Mr Musoni said that owing to strong growth in 2008with booming business activity, fiscal performance exceeded targets by 28 per cent.

He added that government expenditures were contained within the projected limits to avoid fuelling inflationary pressure.
“Consequently, the projected fiscal deficit reduced by 49 per cent and the government was able to increase its reserves.

The main impacts for Rwanda of the current global financial and economic crisis are expected to be reduced demand for exports such as tea and coffee, reduced income and revenues from tourism and the possibility of reduced aid flows in the medium term as Western governments reduce their spending,” he said.

“The government will continue to invest in the priorities outlined in its poverty reduction programmes, which will provide a solid base for future growth and ensure that Rwanda weathers the global financial storm,” he added