Senate backs new bill on public finance management

The Plenary Sitting of the Senate on Monday, August 8, approved the relevance of the draft organic law on public finance management, which seeks to introduce changes in emergency budgeting and fiscal risk management, among others. This draft organic law is a revision of the current organic law on State Finances and property enacted in September 2013. According to the Government, the bill seeks to address the gaps identified through the analysis of the existing organic law. They are summarised under aspects including its narrowed scope leading to issue of accountability, and absence of Boards of Directors for Public Financial Management (PFM) matters in State-owned companies and specialised organs. Other issues include those related to budget management (that is emergency revisions); as well as fiscal risks associated with public corporations (guarantees and on lending) and public-private partnerships (PPP). “This bill [once enacted into law], will help public entities to improve public finance management and achieve the outcome expected from them in the yearly action plans,” said Richard Tusabe, Minister of State in charge of National Treasury at the Ministry of Finance and Economic Planning (MINECOFIN), while explaining the relevance of the bill to the Senate. Key changes proposed by the bill to support PFM reforms 1. Emergency budget revisions To improve the budget adjustments, the rules on emergency budget revisions are introduced for expediting response to the future crisis, including disasters and pandemics such as Covid-19, instead of waiting for the ordinary budget revision which is done after six months of the approval of the financial plan. Tusabe explained that the emergency budget is projected to rise from 3 percent of the recurrent spending to 3 percent of the total budget in the central Government, and from 3 percent of the revenues generated by decentralised administrative entities to 3 percent of those revenues plus the unconditional grants such as local grants. 2. Strengthening the oversight of public finance According to the explanatory note of the bill, the scope of the organic law has been expanded to include all public sector entities, and new planning and Budget Outlook paper will be submitted to Cabinet at an earlier stage of the planning and budget process. Also, the contents of the Budget Framework Paper are expanded to include a tax expenditure report and a fiscal risk statement. Tusabe said that the tax expenditure report will include the amount of taxes that the Government forgoes mainly in attracting investors through tax incentives, and what contribution that made to the country’s development. Richard Tusabe, Minister of State in charge of National Treasury at the Ministry of Finance and Economic Planning, addresses senators during the plenary sitting on Monday, August 8. Photo: Courtesy. On fiscal risk statement, which considers the risks that the country is exposed to and may lead to deviations in its economic forecasts, Tusabe told Senators that these are many, citing disasters and pandemics such as the current Covid-19. “This move will be providing us the occasion to identify the risks that the country is faced with in a broader context, and we will be submitting the related report to you [Parliament] so that we get a picture of the risk factors, but also have an opportunity to devise a strategy to tackle them,” he observed. 3. Creation of fiscal risks committee To strengthen the fiscal risk management and enhance fiscal transparency, a reference to a fiscal risks committee is included. Also, budget documents are expanded to include comprehensive tables on all financing transactions of projects and public private partnerships; and summary budgets of all State-owned companies and specialised organs that are not Central Government entities. Senator Hadidja Murangwa said that the fiscal risk committee is something to appreciate as it will be helping in assessing the investments and incentives that the Government provides to investors such as in terms of tax break, before they are granted. “The Government incurs huge costs here, yet the public is not aware of it. This is the opportunity to know the investments that are reported in the country, firms that come to operate in Rwanda and are granted tax incentives to ease their doing business, and how effective they are in terms of benefiting Rwandans,” she said. 4. Carryover of allocated funds to the next fiscal year Still in line with improving the budget adjustments, the carryover of appropriations is authorised for ensuring settlement of past-year liabilities. Currently, MINECOFIN was taking such unused funds from the concerned public entities after a fiscal year ends on June 30. However, the thresholds of reallocations between different programmes is expected to be reduced (from the current 20 percent to 10 percent) for strengthening accountability for programme-based budgeting. This, Tusabe said, intended to avoid instability in the budgeting for given initiatives, and it is also based on the reforms being made in line with performance budgeting for effective financial planning. These, he said, are good practices in line with the Government fulfilling its commitments. If the fiscal year concludes in June, yet there is a contractor who provided services to the Government [then, but was not yet paid], instead of the Government taking the money from the entity to which it was allocated, the entity will remain with it so it is able to make payment on time,” he said. Senator Pelagie Uwera appreciated the proposal, saying that allowing public entities to carry forward unspent funds into the next fiscal year could support them to expedite payment of outstanding amounts owed to suppliers or contractors.

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Senate backs new bill on public finance management