The government of Rwanda will need to cut spending by Rwf8.5 billion in a planned review of the FY 2010/2011 budget on concerns of a huge shortfall in the country’s tax revenue.

John Rwangombwa, the Minister of Finance and Economic Planning told a press briefing, Friday, that domestic taxes as of November 2010 amounted to Rwf189 billion against the target of Rwf479 billion.

"Depending on the performance so far in the revised budget we intend to present to parliament by January next year, we expect to reduce by Rwf8.5 billion,” he said.
Rwanda’s initial budget for the FY 2010/2011 is equivalent to Rwf899 billion.

Traditionally, the budget growth has been experienced at 0.5 percent and the new development will keep the government on track to meet the overall budget targets and maintain economic stability, the Minister said.

He allayed fears that the shortfall in tax revenue is a result of the poor performance of Rwanda Revenue Authority (RRA).

"…the target was really big. We over stretched. We wanted to give ourselves this jump which was high and we increased by 4 percent; we will reduce slightly to be more realistic.”

Without divulging details off whether the action would also downgrade economic growth forecasts, Rwangombwa said that the economy still has good growth prospects and also expects continued financing from development partners. 

"Inflation is in single digits. If you can maintain macroeconomic stability, it is important for growth,
Depending on the evaluation in October and the outlook for the remaining period of the year, the economy is growing (at) about 7.0 percent as we expected.”

Government also has the ability to borrow up to the tune of $100 million (58.3 billion) per year and can go to between 20 and 25 years without a debt burden, the Minister said.
Government’s domestic debt sums up to Rwf176 billion while external debt is $717 million, according to official figures.
"The fact is that though the numbers might sound big…we still have more room to borrow depending on the net present value of debt,” Rwangombwa said.

The Minister noted that government expects to increase domestic taxes through, external debts and   opening the economy to private investors as key to development.
Rwanda’s economy expanded by 9.4 percent in the second quarter of 2010 from a year earlier, driven by 15 percent growth in services.

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