The Rwanda government has lifted a freeze on recruitment of public sector workers.

In its draft budget for the 2013/14 financial year, the Treasury has also proposed to resume funding to delayed projects after months of austerity measures.

The Treasury seeks to increase spending to Rwf1.576 trillion ($2.5 billion), up from Rwf1.425 trillion ($2.2 billion) in the 2012/2013 financial year.

The government suspended the hiring of public servants towards the end of last year following the suspension of donor aid over allegations that Rwanda was aiding the M23 rebels in eastern Democratic Republic of Congo.

READ: Rwanda adjusts budget, cuts spending by $99m

Now Treasury proposes to spend Rwf204.8 billion ($320 million) on wages and salaries, which is Rwf26.6 billion ($40.6 million) higher than last year’s estimates, to facilitate planned recruitment in the education and health sectors. The government is the biggest employer in the country.

The suspension of recruitment of teachers has hurt education, especially in the rural areas, where the teacher-student ratio is low. It also eroded the gains made by increasing enrolment in educational institutions.

“Institutions that need to recruit can go ahead, and important projects that had been postponed can be implemented,” said Kampeta Sayinzoga, Permanent Secretary in the Ministry of Finance and Secretary to the Treasury.

Hiring of government staff will increase recurrent expenditure from Rwf634.6 billion ($991.9 million) in the 2012/2013 budget to Rwf710.4 billion ($1.1 billion).

Even as uncertainty over budget support funds continues, the government plans to increase spending on goods and services to Rwf131.1 billion ($205 million), from Rwf117.4 billion ($183.5 million) in 2012/2013.

The new funds are meant for a drugs, vaccines and other health supplies, books and foodstuffs for students, and road maintenance.

Although increasing spending on drugs and vaccines is seen as a good move, some health sector players say professional negligence, corruption and bad procurement procedures are rampant in the public health sector.

At the beginning of this year, Kigali was hit by drugs shortage, and Ministry of Finance officials accused their Health counterparts of inflating their budget and failing to collect from the Treasury money for citizens’ health insurance.

The plan to increase capital spending to Rwf744.5 billion ($1.2 billion) from Rwf625 billion ($975 million) comes as a relief to business operators, who say it will increase business transactions.

The Treasury plans to raise Rwf256.6 billion ($400 million), or 4.8 per cent of the country’s GDP, from the domestic market.

The proposals also include increased funding for ongoing projects in the energy sector to accelerate the electricity rollout programme. Others are roads, irrigation projects and schools and health facilities.

With the flow of foreign aid declining, the Treasury is keen to increase revenue collections and limit new domestic debt. This means taxpayers will have to tighten their belts.

The draft budget sets a target of Rwf749.1 billion ($1.2 billion) in tax revenues. Most of the tax will be levied on goods and services, which are expected to generate Rwf399.9 billion ($626.6 million).

“A more moderate increase is projected for direct taxes, which are projected to generate Rwf301.5 billion ($472 million), and taxes on international trade, which are expected to be Rwf47.7 billion ($74.7 million),” the draft budget states.

The main reason for the modest increase in taxes on international trade is the shift towards imports, especially of consumer goods from the East African Community.

While the draft budget does not introduce substantial changes in the tax regime, it proposes a royalty tax on minerals. The government seeks to levy a four per cent tax on extracted minerals and six per cent on precious metals and stones.

The Rwanda Revenue Authority plans to introduce e-filing and e-payment of taxes to cut compliance costs.