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Rwanda trade deficit falls on higher revenues

Monday January 23 2017
air cargo

Cargo being loaded into RwandAir. The country's external debts rose when national carrier failed to repay a portion of its debt on time in 2016. PHOTO | FILE

Rwanda narrowed its primary deficit in the 2015/16 fiscal year on the back of improved tax collections and lower government spending.

Both the government and the International Monetary Fund had projected a current account deficit of 5 per cent, but a recent review for the year found a deficit of 3.5 per cent, the IMF said in its latest country report.

Higher tax collections and spending below what had been programmed for the year contributed to the low deficit, the IMF said at the end of the Sixth Policy Support Instrument Review earlier this month.

Statistics from the Rwanda Revenue Authority indicate that Rwf986.6 billion was collected in 2015/16, overshooting a target of Rwf949.2 billion ($1.16 billion) by 3.9 per cent. Total expenditure amounted to Rwf1.49 trillion ($1.4 billion) against a revised budget of Rwf1.52 trillion ($1.85 billion).

The lower spending was occasioned by a rollover of infrastructure projects in the energy and roads sectors, whose implementation had been delayed. The implementation was rolled over into fiscal year 2016/17, raising the possibility of a spike in spending this year.

Officials however say that the rollover will have minimal impact on this year’s deficit, which is also expected to remain within the 5 per cent band. 

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“We negotiated with the IMF and agreed that the projects that were not implemented last year will be implemented this year – meaning that we will increase our spending by around one per cent of GDP. This is still within our fiscal deficit target,” Leonard Rugwabiza, the chief economist at the Ministry of Finance, told The EastAfrican. 

“We need to make sure that our deficit is controlled. We will try to reduce the deficit while paying more attention to key priority projects,” he added.

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However, the IMF noted that the country’s external debts rose when national carrier RwandAir failed to repay a portion of its debt on time last year. Rwanda supported RwandAir’s operations with a net lending of Rwf40 billion.

The Ministry of Finance said it has put in place a “stringent debt monitoring system.”

“Rwanda is now ensuring that in 2018 and 2019, we continue on the level of spending that is reasonable,” Mr Rugwabiza said.

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