Rwanda is adjusting its public spending to accelerate economic recovery from the Covid-19 effects—characterized by job losses, disruption in international travels and global supply chains.
Prime Minister Edouard Ngirente announced the development Wednesday during a media briefing in which he shed light on the government’s response towards inflationary pressures and developments in the current economic recovery process.
Under the new plan, the government will inject an extra Rwf150 billion in the Economic Recovery Fund (ERF), adding to the initial Rwf100 billion, Ngirente disclosed.
Increased spending also comes with reforms to the ERF — a policy response which was unleashed two years ago to support Covid-19 hit businesses.
"In a few days, not later than two to three weeks we plan to launch the second phase of this facility for it to continue servicing the public,” said Ngirente, who was flanked by various senior government officials.
"There have also been some adjustments to the facility because initially we were still in Covid-19 times which deterred accessibility to some businesses and also awareness,” he added, "But we look to improve both.”
Ngirente said that ERF which has contributed towards subsidising transport costs is among the interventions that have been key in Rwanda’s recovery process.
For instance, he said that one of the other interventions made is the "Manufacture and Build” to recover programme under which 38 industries are to kick start operations in the next two years.
New adjustments
The increased spending, according to Minister of Finance and Economic Planning Uzziel Ndagijimana will prioritize key sectors that are expected to significantly contribute towards economic growth and recovery.
They include the manufacturing sector and value chains, agriculture and value chains and construction and value chains among others.
"Any investment in those sectors will be eligible subject to viability of the project as assessed by the banks and micro-finance institutions.”
Minister Ndagijimana who explained how the initial funds under the ERF were used across different sectors also said that under the second phase, Rwf5 billion will be used by Business Development Fund to increase its guarantee capacity to support all borrowers.
Rwf7 billion will be used for loan restructuring for companies that are still struggling to service their loans, while the rest will continue to support working capital for existing businesses that have been affected by the crisis.
"The general criteria to access working capital includes demonstrating that the company has been affected by Covid-19 to at least 20 per cent if you compare the turn over before Covid and the turn over during Covid. Initially it was 5 percent but we assume that by this time there is some progress, which informed the adjustment.”
"We think that this additional fund will continue to support private businesses as we support the economic recovery in general,” he added.
Ukraine crisis not a threat
Commenting on Rwanda’s economic strategies in view of the global issues, Ndagijimana said that Rwanda remains consistent with its strategy for economic transformation implemented in 2017 and expected to end in 2024.
"We are also observing the global trends about the economic implications of the Ukraine crisis. We are following closely to see the likely impact and how to respond. Given the experience of Covid-19 we are prepared to respond whenever there is a threat to our economy.”
Journalists covering Prime Minister's press briefing on the government’s response towards inflationary pressures and developments in the current economic recovery process on March 16.
Prime Minister Edouard Ngirente addresses journalists about the government’s response towards inflationary pressures and developments in the current economic recovery process on March 16.