BUDGET: Budget provides stimulus to sustainable growth

This year’s budget has factored in significant allocations to various strategic public investments that span transport, energy and ICT sectors. These special investments should provide a stimulus capable of spilling-over to other key sectors of the economy. Finance Minister, John Rwangombwa, said the allocations in strategic public investments are meant to remove various bottlenecks in Rwanda’s economy such as inadequate infrastructure that is seen as key to actualising the transformation agenda. Consequently, such allocations are meant to not only ensure growth and prosperity but also to reduce Rwanda’s dependency on external aid while ultimately narrowing the growing balance of payments gap. “In this regard, I also highlight our key strategic investment projects which are at the heart of our medium term development plan”, Rwangombwa informed parliament while delivering this year’s budget. The focus on energy investments entails the broadening of Rwanda’s energy access by increasing household and other grid connections. The electricity access rollout programme is meant to connect electricity to some 350,000 households by 2012. The energy investment with total allocations of Rwf98.6 billion also entails boosting increased power production. The completion of various projects that should supply over 39.5 MW to the national grid from hydro sources while another 15 MW is expected to be developed from peat has been planned. A thermal power plant of 10 MW is also in the pipeline so is a planned implementation of a biogas project to substitute charcoal use and save the environment. Within the ICT sector, there is the planned completion of the ongoing fiber optic program. The programme is meant to provide broadband wireless technology to several users. In the transport sector, apart from the planned traditional rehabilitation and upgrading of classified national road networks as well as rehabilitation and upgrading of urban road networks, there are notable strategic investment projects planned. This includes the rehabilitation and extension of Kigali International Airport as well as the finalisation of the public private partnership framework and concessioners arrangement for the construction and operation of Bugesera International Airport. Also in the works within the transport sector is delivering on Rwanda’s commitment with the governments of Burundi and Tanzania to start the construction of an international railway line linking out the three states through finalizing of the detailed study for the project. The budget also allocates resources to the up scaling of the Kigali Conference Center with a five star hotel. “Consistent with these objectives, our expenditure policies in fiscal year 2010/2011 which I am going to highlight, therefore provides some resources to move the implementation of these projects forward”. The aim of making such strategic public investments, according to Rwangombwa is to pursue major structural reforms within Rwanda’s economy. These public investments will ultimately provide new approaches focused on improving Rwanda’s infrastructure base. For instance, deepening the financial sector through completion of the fibre optic will fasten connection among the country’s commercial banking sector. Continued stimulation of the commercial banking sector, is expected to provide a spill-over into boosting efforts aimed at diversifying Rwanda’s export base. By boosting exports through having a new airport, Rwanda seeks to improve its business climate further. Such an approach of developing a new airport with a bigger capacity than the current one at Kanombe, ultimately, has high chances of providing yet another major spill over, which targets increasing private investment. Already, Rwanda Development Board (RDB) has been tasked with attracting investments of more than $500 million this year. Rwangombwa adds that the strategic public investment lined up in his budget speech, is part of the overall medium term macroeconomic framework which was recently agreed between government and the International Monetary Fund (IMF) and Rwanda’s development partners. “Our overriding economic objective remains achieving real GDP growth rates averaging about 8 percent per year in the medium term”. It is expected that such strategic investment projects should begin to impact on Rwanda’s economic performance for the next 5 years. The growth in Rwanda’s industrial sector which is set at between 7.6 percent and 8 percent annually will be led by electricity, gas and water sector growth as well as construction sub-sectors. These sectors are some of the major beneficiaries of the strategic investments. Ends