Rwanda’s economic growth was 7 percent in 2007, and will be slightly above that in 2008, Finance Minister James Musoni said on Monday.

Musoni said economy’s 2007 growth was driven by the industrial and service sectors while the country’s backbone agricultural sector registered no growth.

High food prices coupled with increasing price for utilities, rent and healthcare pushed inflation to 11 percent, Musoni said.

Bad weather hurt food production, while export crops suffered as coffee and tea underperformed compared to the previous year. Coffee output is expected to decline by 30 percent before close of this year.

Musoni gave the figures during a budget reading in which he said total expenditure would rise 15.7 percent to Frw607.5 billion in the 2008 fiscal year from Frw527.9 billion in 2007.

Most of the expenditure rise would go to pay for infrastructure investments, free education and the cost of legislative elections, he said.

"The 2008 budget comes to answer three key challenges of our economy which include a weak private sector, a rapidly rising population and weakness in the agricultural productivity,” he said.

The budget would be financed from domestic revenues of Frw325.5 billion and donor support of Frw282 billion representing 46 percent of the entire budget.

Infrastructure funding includes plans to construct roads, rehabilitate power plants and pay for feasibility studies for a new international airport and a railway line connecting Rwanda to Tanzania.

"(There will be) no change in the taxation system for now, pending recommendations from the ongoing study on widening the tax base in Rwanda and the fiscal implications of Rwanda joining the East African Community,” Musoni said.

The Rwandan government has struggled to rebuild its economy which was shattered by the 1994 Genocide when over one million people were killed. The country has adopted an ambitious programme dubbed "Vision 2020” where it targets to increase per capita income to US$900 (about Frw486, 000) from the present Frw124200, approx. US$230.

Reuters