The Plenary Sitting of the Chamber of Deputies is set to approve the State Finance bill today, June 29, in which the budget envelope for the fiscal year 2022/2023, which will start on July 1, is Rwf4,658.4 billion (over Rwf4.6 trillion).

Compared to the Rwf4,440.6 billion budget for the current fiscal year, which will end tomorrow, June 30, the proposed financial plan for next year represents an increase of Rwf217.8 billion or 4.7 percent.    

Here are some of the things you need to know about the proposed budget for the next fiscal year:

Overall budget funding, spending

Among the sources of funding for the financial plan, domestic resources will amount to Rwf2,654.9 billion representing 57 per cent of the entire budget. It will also be funded by external grants, which will contribute Rwf906.9 billion (19.5 per cent), and external loans that will account for Rwf1,096.7 billion (23.5 per cent).

Domestic resources including the acquisition of financial assets are Rwf2,654.9 billion, which is 57 percent of the total budget for the fiscal year 2022/2023.

The total domestic resources and external loans combined account for 80.5% of the entire budget of 2022/2023 fiscal year.

Regarding the expenditure policies for 2022/23 fiscal year, Rwf2,585.1 billion were allocated on recurrent expenditures represented by 55.4 percent of the total budget.

In the case of capital spending (development budget), Rwf2,073.3 billion, representing 44.6 percent of the total budget, was allocated.

Spending priority consideration

The policies and strategies over the 2022/23 national budget are by and large guided by the National Strategy for Transformation (NST1) program.

The Government will continue to consolidate the public finances to reduce fiscal deficits and stabilise debt levels while responding to remaining scars from Covid-19 and the negative impact the war in Ukraine is having on the recovery of the economy and on households’ income and spending.

And, the theme for the 2022/23 budget is "Accelerating Economic Recovery and Enhancing Productive Sectors for Improved Livelihood.”

This theme, according to the Minister of Finance and Economic Planning, Uzziel Ndagijimana, was chosen by all East African Community (EAC)  Finance Ministers to demonstrate total commitment to economic recovery from the Covid19 pandemic outbreak as well as safeguarding lives, jobs, business and industrial recovery.

This commitment is also in line with the content of the seven-year Government Programme of the National Strategy for Transformation (NST1). 

"In the 2022/23 budget and the medium term, we intend to increase the production in different sectors, safeguarding the welfare of the population and enforce policies to create additional jobs," Ndagijimana said while presenting the proposed 2022-23 national budget to Parliament on June 23, 2022.  

Covid-19, Russia-Ukraine war to slow economic growth

Regarding domestic growth in 2022, it will greatly depend on global economic performance, especially the impact of Covid-19 crisis and the Russia-Ukraine war, according to the Ministry of Finance and Economic Planning.  

Small economic growth in 2022 is expected globally. According to the International Monetary Fund (IMF)’s April 2022 World Economic Outlook (WEO), Global growth is estimated to grow at 3.6 percent in 2022 compared to 6.1 percent growth recorded in 2021.

The decline reflects the negative impacts of Covid-19 and the ongoing Russia-Ukraine war and sanctions on Russia, which resulted in rising energy and food prices, fertilisers and supply disruptions that fuel higher inflation all over the world.  

It indicated that Rwanda’s economic growth is expected to moderate in 2022 to 6 percent from 10.9 percent achieved in 2021, mainly because of the above mentioned economic crises. It is to note that the country’s economy had contracted by 3.4 percent in 2020 due to the economic impact of the Covid-19 pandemic.

The output growth in sub-Saharan Africa is projected at 3.8 percent compared to 4.5 percent in 2021.

Inflation

Inflation or overall increase in prices of goods and services is projected at 9.5 percent in 2022 due to the ongoing Russia-Ukraine that increased global commodity prices.   

In 2021, inflation rate remained low during the first nine months with an average of 0.7 percent, largely driven by low food inflation thanks to good harvest.

Inflation however, started to increase in the last quarter (2021Q4), reaching 7.5 percent in March 2022, driven mainly by the rise in food and energy prices as season A agriculture production registered low performance, and the ongoing trade impact of Russia-Ukraine crisis.  

Imports to further outweigh exports

On the external front, the country’s trade deficit – the extent at which the value of the country's imports exceeds the value of its exports – is expected to increase by 23.7 percent from $1.745 billion to $2.160 billion due to increase in imports and recovering economic activities as a result of the recovery measures, and increasing of prices of the imported goods and services.