Rwanda, Burundi get $22m ‘lost’ revenue

Rwanda and Burundi have received $22 million as compensation for projected revenue loss as a result of adopting the East African Community Common External Tariff.

Rwanda received $15.5 million, while Burundi was given $6.5 million from the Comesa Compensation Fund.

The two states had applied to the fund anticipating revenue losses from the implementation of the EAC lower tariff rates.

“This is the first decision to be made under the Comesa Fund for the disbursement of adjustment support,” Comesa Secretary General Sindiso Ngwenya said last week in Kigali.

The Comesa Compensation Fund supports economic integration programmes of the East and Southern Africa region through consolidation of the Comesa Free Trade Area and both Comesa and EAC Customs Union to mitigate loss of Customs revenue and other tax revenues.

Rwanda had said it would suffer a loss of $22.2 million during the June 2009 to July 2010 fiscal year.

Mr Ngwenya said this after the signing of a memorandum of understanding with government of Rwanda, leading to the disbursement of $15.5 million (Rwf8.8 billion) under the Comesa Regional Integration Support Mechanism (RISM).

Rwanda’s Minister of Finance and Economic Planning James Musoni signed on behalf of the government.

Burundi received about $6.5 million under the same facility three weeks ago.

Mr Musoni said Rwanda’s disbursement was estimated at 65 per cent of revenue losses from Customs duties and related taxes.

He added that the country would compute the actual revenue loss by the end of the 2009/2010 fiscal year, incurred in comparison with 2008/2009 revenue and submit a report through the Comesa secretariat.

“Should Rwanda’s estimate be correct, the advisory committee shall advise Comesa to disburse the remaining 35 per cent, equivalent to Euros 3.5 million,” Mr Musoni said.

Rwanda and Burundi officially joined the EAC Customs Union on the July 1 with the Common External Tariff becoming operative immediately in Kigali and Bujumbura.

This meant that goods coming in from outside the EAC region will be immediately be subjected to a new 3-tier tariff band of zero per cent for raw materials, 10 per cent for intermediary products and 25 per cent for finished products.

There were fears that without the Comesa adjustment facility, expenditures under the 2009/2010 Rwandan budget would be constrained by limited resources.

Rwanda’s budget was thus prepared in way that there would be sufficient domestic resources to cover at least recurrent spending by 2012.

By July 2009 the country had also implemented a number of policy measures that would facilitate trade and fast track economic integration with the other EAC partner state.

One of the measures is the removal of surcharge on sugar that cost the government about $3.9 million (Rwf 2.2 billion).

Also, the country provided fiscal incentives in the form of exemptions to alternative sources of energy like liquefied petroleum gas and energy saving devices.

Officials say this would cost government about $526,300 (Rwf300 million).