Experts have commended the 2016/17 Budget presented to Parliament, saying it is tilted in the right direction – toward economic sustainability. The Rwf1,949.4 billion 2016/17 Budget was presented to a joint session of Parliament, yesterday, by Finance and Economic Planning minister Claver Gatete. Allan Gichuhi, the Rwanda Ernest & Young managing partner, said the decision to encourage export diversification, while promoting consumption of locally made products is a great step. “We, however, must be creative and work hard to widen our tax base while ensuring total tax compliance to be able to meet the fiscal year’s targets,” Gichuhi told The New Times. Reacting to the budget increment, Andrew Mold, a UN Economic Commission for Africa senior economic affairs officer for eastern Africa, said it represents a quite modest increment in spending - about 8 per cent in nominal terms. “But if we factor in the current rate of inflation of between 4-5 per cent, it only represents an increase of around 3 per cent,” he said, adding that several factors have probably been considered, including the persistence of low commodity prices, and the pessimism pervading global economic prospects. “The World Bank, for instance, is currently predicting just 2.4 per cent growth globally for 2016, and their forecast for sub-Saharan Africa is barely better, at just 2.5 per cent. This is the lowest rate in since 2009. Thus, given the current circumstances in international markets, the Budget seems quite prudent in its key assumptions,” Mold said. Mold also welcomed the emphasis given to economic activities, which he said will either increase export revenues or reduce import volumes. The expenditure allocation in the 2016/17 Budget has been made according to the second Economic Development and Poverty Reduction Strategy (EDPRS II). This, according to experts, is critical for increased productivity, which will keep the country on track to become self-reliant and eventually achieve middle income status. The World Bank has already projected the country’s economy to grow by 6.8 per cent for this year, but will rebound in 2017 to expand to 7.2 per cent. However, inflationary pressures and currency depreciation are some of the challenges those at the heart of the Budget implementation must prepare to face. The only relief, according to the experts, is to continue encouraging consumption of locally made products to reduce on the import bill. Dr Diane Karusisi, Bank of Kigali’s chief executive, said commercial banks have a role to play in promoting consumption of locally produced goods. Karusisi cited the example of locally-manufactured cement, which she said if supported by developers can significantly cut down on imported cement from the region and beyond. “Foreign currency exchange pressures have definitely affected everyone. At Bank of Kigali, we are encouraging our customers to buy and consume Made-in-Rwanda products as a way of relaxing forex pressures,” she said. The 2016/17 Budget highlighted the need to promote local exports as a way of sustaining growth; however, with the World Bank predicting low global economic activity, finding the market for local exports could be the next challenge. Angelo Musinguzi, the KPMG tax manager, says the new Budget and its tax exemption especially in energy, and ICT could help rake in more investors in the long run. I&M Bank chief executive Robin Bairstow said the Budget gives confidence to bankers, especially on how it will address the issue of transfer pricing. editorial@newtimes.co.rw
