Drop in public expenditure to pave way for wage increment

The government could reduce purchase of goods and services to make room for salary increment in the public sector in the next fiscal year, a statement outlining the outcome of a meeting of the International Monetary Fund (IMF) with government officials indicates.The statement, released Wednesday by the IMF, said the meeting brought together the Ministry of Finance, the National Bank of Rwanda and representatives from the private sector and development partners.The IMF delegation, led by Catherine McAuliffe, has been in the country for the past two weeks to conduct discussions for the fourth review under the Policy Support Instrument (PSI). The IMF officials hailed Rwanda’s recent economic performance and its efforts to keep inflationary pressures at bay.“Rwanda’s strong economic growth is expected to continue in a range of between 7.5 to 8 per cent in the next two years,” the statement said.The country’s inflation was steady at close to eight percent, the lowest in the region, helped in part by the reduction in fuel taxes and good harvest.“Performance under the IMF-supported programme continues to be strong,” stated IMF Deputy Division Chief, Catherine McAuliffe.“All end-December 2011 quantitative targets under the programme were met. Structural reforms are advancing, with notable progress in public financial management and analysis of revenue potential.”Rwanda’s 2011 gross domestic product stood at 8.6 percent compared to7.2 per cent a year earlier, spurred by a strong growth in the key agriculture sector, as well as industry and services.The growth was largely based on the industrial sector which grew by 18 per cent in 2011 and mineral products, which were up by 50 per cent, compared with a decrease of 11 percent in 2010, figures released by the statistics office in March showed. Rwanda has had a better run on inflation than other countries in East Africa, including Kenya, Uganda and Tanzania where double digit inflation and weak currencies prompted authorities to increase interest rates to around 20 percent in some cases.“Rwanda’s strong export performance resulted in a larger than expected balance of payments surplus in 2011, together with a large increase in official and private sector inflows,” the IMF said.The 2011/12 budget is expected to remain on track, with higher-than-expected budget support to be allocated to finance additional current and capital expenditure. During the meeting, the government officials and IMF mission discussed downside risks to the outlook, which stem from weaker global demand and higher oil prices.The IMF however warned of the risks of a revenue shortfall.“In the event of a revenue shortfall, the government stands ready to delay non-priority spending to preserve the fiscal consolidation gains of recent years. In the face of rising fuel prices, the authorities will rely primarily on monetary policy to contain inflation,” said McAuliffe.Rwanda’s strong export performance resulted in a larger than expected balance of payments surplus in 2011, together with a large increase in official and private sector inflows, the IMF said.The country’s 2011/2012 budget is expected to remain on track on higher than expected budget support.The IMF’s Executive Board is expected to consider the fourth PSI review in June.

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Drop in public expenditure to pave way for wage increment