The government will mobilise more domestic revenue and reduce reliance on foreign aid to fund the Financial Year 2015/16 National Budget.

Video: Minister Claver Gatete Presenting the 2015/16 Budget. Source: The New Times/YouTube.

That is one of the notable highlights that Finance and Economic Development Minister Amb Claver Gatete announced, yesterday, while presenting the National Budget to a joint session of deputies and senators.

Gatete said the 2015/16 Budget will prioritise infrastructure development for social and economic transformation, with a big portion of the money going into generating electricity, developing industrial parks, and providing communities with clean water, among other things.

In total, the government projects to spend Rwf1.768 trillion in next financial year, representing Rwf5.8 billion increase compared to the Rwf1.762 trillion that was allocated in the 2014/15 revised budget.

The government will finance 66 per cent of its budget through domestic resources, amounting to Rwf1.174 trillion, an increase of Rwf41.6 billion compared to the soon-to-expire budget.

The over Rwf40 billion increase in domestic revenues in the next financial year budget will come from tax and non-tax revenues as well as domestic borrowing, which is expected to increase by Rwf60 billion.

The country’s next budget will depend less on foreign funds, with external resources projected at Rwf594 billion, accounting for 34 per cent of the total budget. This is a decrease from 38 per cent in the current fiscal year.

The government’s reliance on foreign aid for budget support is shrinking, with part of the money expected to make up external resources in the next fiscal year being grants of Rwf358.3 billion. This represents a Rwf58.8 billion reduction compared to the current financial year.

External loans will increase by Rwf23 billion to Rwf235.7 billion in the next financial year, according to Minister Gatete.

The minister told lawmakers that the government has prioritised mobilising money for the budget from local sources, such as enhancing tax collection and borrowing from domestic sources, while at the same time funding key projects in line with the country’s second Economic Development and Poverty Reduction Strategy (EDPRS II).

"Fiscal consolidation through increased revenue mobilisation and expenditure prioritisation remains the key objective of government in the medium term. Donor support grants are projected to reduce to 5.7 per cent of GDP in 2015/16,” he said.

With tax revenues expected at Rwf894.8 billion in the next budget 2015/16, or about 51 per cent of the Budget, Gatete said a set of tax incentives have been introduced, with some tax increases on given products, and waivers on others. 

The minister said a study will be conducted to determine what could be taxable on agricultural products, collection of property tax will be improved and the use of Electronic Billing Machines (EBMs) consolidated, while taxes on petroleum products and tobacco will be increased as those on imported truck vehicles, sugar, and telecom products have been cut.

Expenditure

Overall, the 2015/16 Budget puts special focus on infrastructure development and export promotion and the government has picked ‘infrastructure development for social and economic transformation’ as the budget’s theme.

As usual, the government has based its expenditure projections on priority areas under EDPRS II and related sectors.

The four EDPRS II thematic areas (priorities) – economic transformation for rapid growth, rural development, productivity, youth employment creation and accountable governance – were allocated 50 per cent of the budget (Rwf879.7 billion).

The government has also allocated 38 per cent of the budget (Rwf674.5 billion) to what foundational issues it calls such as basic education, food security, health and peace and security, in which significant progress has already been made and form the platform for Rwanda’s sustainable development.

Another thematic area known as ‘support function’, which focuses on the government’s provision of support services that is essentially central government and government institutions daily business, has been allocated Rwf214 billion (12 per cent of the total Budget).

Challenges

Minister Gatete told lawmakers that the country’s macro-economic programme and the budget have been formulated against several challenges, both domestic and global.

He said domestic challenges include weather conditions which could negatively affect agricultural production with the potential risk to growth and food security, and reduced domestic revenue collection.

On the external front, he cited slow economic growth in developed countries as a likely setback for the country’s economy.

"Risks to global growth and implications for resource flows to the developing countries, including Rwanda, in the form of aid and investment still persist. Commodity price uncertainties and the expected low performance of mining sector could worsen further the terms of trade for Rwanda and reduce the inflow of foreign exchange,” Gatete said.

Legislators have until the end of the month to approve the Proposed Budget before its implementation starts July 1.

editorial@newtimes.co.rw