Rwanda’s annual budget will increase by 14 per cent in the 2011/2012 financial year as the government consolidates development spending to boost growth amid a turbulent global economic environment marked by spiralling fuel and food prices.

According to a draft budget framework presented to parliament last week, the country’s resource envelope will increase from Rwf984.0 billion ($1.65 billion) last year to Rwf 1,116.9 trillion ($1.825 billion).

The framework highlights four pillars of expenditure: Infrastructure rollout; maintaining growth in productive sectors; development of human capital; and promotion of good governance.

According to Finance Minister John Rwangombwa, while total domestic revenue is increasing, it does not provide enough resources for investment.

As a result, the government’s medium term budget policy is to increase resource allocation to investment projects that have more impact on growth while keeping recurrent costs at nominal levels.

“The focus for the 2011/12 financial year and the medium term is to raise adequate resources for completion of strategic investment projects that will allow forward and backward linkages to stimulate growth of other sectors,” Mr Rwangombwa told parliament.

The government’s strategic investments include expansion of national carrier RwandAir, construction of a world-class Kigali Convention Centre with a five-star hotel, increasing broadband access through the 2,300 km fibre-optic cable programme and increasing energy access from six per cent to 16 per cent by 2013.

It also includes construction of a new world-class airport at Bugesera and rehabilitating and rebuilding regional railways linking Rwanda to Burundi and Tanzania.

“This is intended to leverage private-sector financing of development projects while generating employment opportunities and furthering growth,” he said. Completion of the strategic investments will not only increase exports but also broaden the revenue base, he said.

However, the minister cautioned that the projected seven per cent growth is likely to suffer from rising global fuel and food prices that could propel inflation to eight per cent by December.

The minister said spending would focus on the country’s productive capacities, which include key sectors of agriculture, trade, industry and finance.

“The target will be rural transformation through enhancing agriculture supply, promoting agribusiness, scaling up systematic land registration and promotion of value addition for exports,” he went on.

Projections for financial year 2011/12 indicate that the allocation to productive capacities is at 17.9 per cent.

However, human development and social sectors — health, education, social protection, youth culture and sports — continue to receive the lion’s share of government resources, at an estimated 30.5 per cent.

The minister said the focus will be on improving the quality of life of the population with special emphasis on fully implementing the nine-year basic education, skills development through vocational training colleges, promoting ICT in education and strategic support to higher education.

Focus will be on improving health, enhancing family planning services while a new health insurance policy will be implemented.

In the fiscal year 2011/2012, donor budget support grants are estimated to increase to Rwf455.5 billion ($769.4 million) against Rwf372.5billion ($629.3 million) projected for 2010/2011.

Currently, Rwanda’s direct budget support stands at about 21 per cent.

In the new financial year, the government also plans to reduce the overall budget deficit including grants from 4.4 per cent of GDP in 2010/11 to two per cent of GDP while net domestic financing is expected to decline from 2.2 per cent of GDP in 2010/2011 to 0.3 per cent.

The minister said the government plans to further increase domestic revenue and prioritise expenditures to improve fiscal consolidation.

To achieve this, in the new financial year, the government aims to increase domestic resource mobilisation by about 0.2 per cent of GDP from 13.6 percent.