Budget: Ministers expound on Gov’t spending, tax cuts

In a bid to sensitise the masses on government spending in the 2011/12 fiscal year, government officials have began a campaign to expound more on how the government will spend the over Rwf1 trillion budget in the next 12 months. The exercise is championed by the Minister of Finance, John Rwangombwa, together with three other ministers – Agriculture, Education, Infrastructure - who got priority funding. Following the reading of the National Budget on Wednesday, the four ministers took questions from the reporters in a live call-in news conference. Rwangombwa explained that the Rwf 14 billion loss to be incurred by the government following the slashing of taxes on petroleum products will be covered by the sale of government shares in BRALIRWA and MTN, expected to raise Rwf 25 billion. He said that the government would reduce taxes on fuel to halt pump prices from increasing, but added that the impact will be mainly felt in declining commodity prices by the end of the year and early next year. “We know that fuel prices affect the movement of goods so the action the government is taking is aimed at influencing domestic price levels through reduced domestic fuel pump price. “By reducing taxes on both petrol and diesel by Rwf 100 per litre, pump prices will reduce. Pump prices affect the movement of goods, so by reducing them, both food and commodity prices will effectively go down. We will talk to fuel importers to see what to do,” Rwangombwa said. He, however, said that the decision to reduce taxes on fuel will unlikely lead to a reduction of passenger fares since it is mainly aimed at reducing commodity prices. “I have already stated that Government has accepted the fact that we must start harmonising our fuel tax rates with those in the region, and at the same time reduce the inflationary pressure emanating from world fuel and food price increases,” the minister said. The reduction is to be carried out in two stages: In the June-December period of 2011, the government will effect a reduction in fuel taxes by Rwf 50 per litre for both super and diesel, while the second reduction of Rwf 50 will to be carried out in January 2012. Rwangombwa said that if the global oil prices do not escalate, average pump prices for both super and gasoil should come down and that at the beginning of next month, new prices will be announced. In a bid to fill the gaps caused by government losses, Rwangombwa said that they aim increase tax efficiency, by among others, deducting VAT and submitting it directly to the revenue authority from all the goods and services the government will procure. Despite uncertainties projected in the next 12 months, including an inflation rate of 7.5 percent, unstable food and commodity prices, Rwangombwa said that he is optimistic that the economy will grow by 7 percent in 2011 and between 7.5 to 8 percent in 2012. “Inflation is expected to hit an all time high of 7.5 percent, this is a figure we are not used to, but we are optimistic that with keen monetary and tax policies in place, the situation will remain under control,” Rwangombwa said. It is expected that despite the challenges, a number of sectors expected to perform well will boost the economy as well as several government programmes aimed at achieving sustainable growth. The agriculture sector, trade and manufacturing, a flourishing banking sector, remittances, real estate and construction, as well as tourism, will provide cushions to the economy, still coming to terms with the effects of the global financial crisis. On her part, the Minister of Agriculture, Dr. Agnes Kalibata, shed light on several government projects where efforts will be directed in line with the budget theme; “Ensuring Food Security and Price Stability whilst Maintaining Sustainable Growth” The agriculture sector was allocated Rwf 67.1 billion and most of the money will go towards irrigation and implementing the countrywide crop intensification programme to boost yields. Among other things, the government will focus on encouraging farmers to grow high yield crops such as maize and supply them with incentives such as fertilisers. “That is what we tell our people, if they come together and grow the same crop, it is very easy to supply them with fertilisers and other incentives. Even the irrigation we talk about works properly when people consolidate land and carry out an intensive project,” she said. Kalibata said that it is expected that the harvest for this season will be stable despite the rain stopping before crops such as maize could be ready for harvest, adding that the government is trying to help farmers water the near ready crops. She noted that the government intends to increase reserves from 10,000 tonnes to 20,000 while irrigation projects for over 2,000 hectares are already underway. Food prices are also expected to decline. The Minister of Infrastructure, Albert Nsengiyumva, highlighted priority areas mainly in upgrading the national road network as well as energy generation projects, while the Minister of Education Pierre Damien Habumuremyi expounded on the spending in the education sector in the coming fiscal year. Ends