Rwanda is expected to increase allocations to infrastructure projects in the coming year, as the government steps up investment spending in the budget to be read mid next month.
According to a draft budget framework paper for 2012/2013 that is expected to be presented to parliament for scrutiny this week, infrastructure — transport and energy — will receive 23.3 per cent of the total budget or Rwf321.2 billion ($5 billion), an increase of 25 per cent over last year’s allocation of Rwf256.9 billion ($429 million).
Key projects will include rehabilitation and maintenance of feeder roads, increasing access to electricity and speeding up ongoing hydropower projects.
This includes completion of the Kigali-Ruhengeri road (83.1 km), expropriation and construction of access roads to the planned new Bugesera International Airport and extension of the Kigali International Airport.
Energy projects include fast-tracking micro hydro sites with an estimated capacity of 24.18 MW in the 10 poorest districts in the country to supply power to 61,000 households by 2012/14.
This is expected to increase access to electricity in poor households to 13 per cent by the end of 2013, up from 2 per cent.
There are also plans to increase power generation by 15MW with the development of the Peat to Power project in Bugarama, Rusizi district.
The government’s total expenditure and net lending in the new financial year are estimated at Rwf1,331 billion ( $22.2 billion ) or 28 per cent of GDP, up from Rwf1,105 billion ($18 billion ) or 26.9 per cent of GDP in 2011/2012.
“The increase in total government expenditure is largely due to an increase in spending on capital projects that are intended to boost medium-term growth prospects. The government will have to resort to small domestic borrowing to finance the resulting deficit, but there will still be enough resources left in the banking system to finance a healthy expansion of credit to the private sector,” Dmitry Gershenson, resident representative of the International Monetary Fund told The EastAfrican.
As in 2011/12, economic growth in 2012/13 will be driven by agriculture, exports, and domestic demand, though the economy is projected to grow at about 7.7 per cent, down from 8.6 per cent in 2011/12.
This is mainly due to the expected adverse impact of weak global demand, low commodity prices and high oil prices.
“The key challenge will be to maintain this strong growth and low inflation [projected at 7.5 per cent at end-2012] in a highly uncertain global environment. Weaker than expected global demand could negatively affect Rwanda’s exports and higher than expected international food and fuel prices could add to inflationary pressures,” Mr Gershenson said.
He added: “Should that happen, timely actions by the government to limit domestic borrowing to avoid crowding out credit to the private sector and contain inflation will be essential,”
The government will be seeking to raise resources to increase public sector wages, fund programmes that create non-farm jobs and support social protection. Increments in public service wages and salaries are projected to cost Rwf46.7 billion ($7.8 billion) in 2012/13, though the Treasury also proposes to freeze further increases in the wage bill for the subsequent two fiscal years.
The biggest beneficiaries of changes in the salary structure are lower public primary school teachers, currently the lowest paid civil servants.
This will see the net salary of primary teachers increase to Rwf48,168 ($80) from the current Rwf41,804 ($70).