Rwanda plans to increase its 2021/2022 spending by $608.7 million to $4.2 billion as government plans for debt repayment and Covid-19-related expenditure, including vaccine rollout.
The country’s overall budget for the current fiscal year will rise from the initial $3.6 billion under the changes tabled in Parliament for approval Monday.
Debt servicing takes a big chunk of the additional spending at $327.6 million.
Uzziel Ndagijimana, the minister of Finance and Economic Planning, told Parliament that debt repayment will absorb a total of $734.1 million on account of the 2013 Eurobond redemption and the RwandaAir debt servicing.
The government has also earmarked $4.7 million additional allocations to expenses related to its Commonwealth Heads of Government Meeting (CHOGM) 2022.
The summit, which was postponed twice due to the global pandemic, will now be held in the capital Kigali starting the week of June 20, 2022, according to a joint announcement recently released by the government of Rwanda and the Commonwealth secretariat.
Other expenditure items to receive additional allocations include the operationalisation of embassies expected to receive $6.6 million, allocation under different agencies due to revised lump sum allowance at $10.7 million, and additional allocation to cover the gap for the school feeding programme to all levels of education at $4.8 million.
The explanatory note sent to Parliament by the Treasury shows that the government expects new revenues from various sources, including $147.7 million equivalent of Special Drawing Rights (SDRs) allocated to the country by the IMF “to support our efforts to address the impact of Covid-19 in the fiscal year 2021/2022 by financing high-quality investment projects key to building post-pandemic resilience.”
Rwanda received an allocation of $219 million SDRs. This was part of the International Monetary Fund’s $650 billion released to its members that can be used to supplement the country’s reserves or be converted into cash to supplement public revenues and to increase spending for development prospects hard hit by the pandemic.
The treasury indicates that $65.2 million will be kept under the Central Bank reserves to be used in retiring the remaining 2013 Eurobond that will mature in 2023.
Following a resumption in economic activities, the government expects an increase in domestic revenues arising from additional taxes and other revenues.
Tax revenues are projected to increase by $40.6 million to $1.7 trillion.
“This increment will come mainly from taxes on income, profits and capital gains, taxes on good and services as a result of economic recovery in doing business, as well as improved collection of taxes,” details shared by the Treasury show.
Besides, other expected revenue receipts initially projected at $265.3 million have been revised upwards to $373.1 million as a result of $310.3 million coming from the IMF debt relief. This follows the IMF’s decision to forgive debts of some developing countries, including Rwanda, during the economic crisis caused by the coronavirus pandemic.
The Rwandan government indicates that the economy remains on a recovery path from the 2020 pandemic-induced recession.
Data shows that the services sector recorded a growth above zero for the second time in a row driven mainly by hospitality and social subsectors favoured by Covid-19-related restrictions that were low in the third quarter of 2021 compared to the second quarter that had a two-week lockdown.