By Johnson Kanamugire

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Rwanda plans to increase its 2021/2022 budget by Rwf219 billion ($220.8 million) as the government battles shocks from the global pandemic and seeks to revive the economy.

The initial budget of Rwf3,245.7 billion ($3.2 billion) has been revised upwards to Rwf3,464.7 billion ($3.4 billion) as per the proposed changes awaiting approval by parliament this week.

The education sector takes up the largest proportion of the budget followed by the health sector, to enable infrastructure expansion, purchase of equipment and staffing occasioned by the global health emergency.

The budget will be funded largely by domestic revenues projected to increase to Rwf1,784.4 billion ($1.7 billion) from Rwf1,605.7 billion ($1.6 billion) highlighted in the initial budget.

The Treasury projects a rise in both tax revenues and non-tax revenues to Rwf1,579.9 billion ($1.5 billion) and Rwf204.8 billion ($206.5 million) respectively, an upward revision from Rwf1,421.3 billion ($1.4 billion) and Rwf184.3 billion ($185.8 million).

The budget will be funded by external resources totalling Rwf1,358.6 billion ($1.3 billion) with Rwf592.2 billion ($596.9 million) mobilised from grants and Rwf766.4 billion ($772.5 million) acquired through foreign debt facilities.

While grants have been revised upwards by about Rwf99.8 billion ($100.6 million), there has been a decline of Rwf17 billion ($17 million) in the loan financing segment.

Development projects

A huge chunk of the budget will be directed towards financing development projects and routine state expenditures, including reimbursement of public debts and interest payments estimated to cost Rwf338.7 billion ($341.4 million).

The National Institute of Statistics shows that GDP growth decreased by 3.6 percent in the third quarter of 2020 compared with the same period in 2019, reflecting the adverse effects of the global pandemic.

Economic projections by the International Monetary Fund (IMF) indicated that Rwanda’s economy would contract by 0.2 percent in 2020, following a 4.4 percent decline recorded in the first six months of the year. But, economic growth was expected to recover to around 5.7 percent this year, according to IMF figures.

However, a new lockdown recently announced by the government and renewed business restrictions prompted by a surge of Covid-19 cases detected towards the end of last year have increased slowdown risks of the economy.

“The uncertain outlook calls for sound contingency planning and fiscal risk management. To preserve fiscal space, the authorities should reprioritise spending and seek additional concessional financing should the outlook deteriorate further,” the IMF noted in its periodic country review.

Rwanda’s economy was initially set to grow at an unprecedented rate of 8.1 percent in 2020. The Treasury previously projected economic recovery rates of 6.3 percent and eight per cent in 2021 and 2022 after months of global trade disruptions and diminished output experienced in the hospitality and transport sectors.

Some legislators feel the government should prioritise agricultural related spending for a sector that employs a majority of Rwandans alongside the education sector, one of the most hard hit areas of the economy by lockdown measures.

“We can also increase the budget for local manufacturing and assist SMEs to grow and export so that the country gets some foreign currency. Due to Covid-19, national production reduced and tax collection will fall,” said MP Frank Habineza.

Private sector players feel left out and nearly abandoned in the absence of an economic recovery fund targeted at struggling businesses.

“We have been in negotiations to see if the government can consider others sectors that were not prioritised,” said Joseph Akamuntu, head of the chamber of commerce and services at the Rwanda Private Sector Federation.