Budget to increase to Rwf1.6 trillion

The Government expenditure will rise to Rwf1.6 trillion in the 2013/2014 fiscal year, up from about Rwf1.4 trillion this year. Pichette Kampeta Sayinzoga, the permanent secretary in the Ministry of Finance and Economic Planning, and Secretary to the Treasury, announced this yesterday while briefing journalists on the 2013/2014 Budget Framework Paper approved by Cabinet on Wednesday. The framework indicates that in spite of the decrease in foreign aid budgetary support, there was an increase in capital grants and taxes that will fund government’s projects. Tax projectionsSayinzoga said Rwanda Revenue Authority (RRA) projects to collect Rwf100 billion, as the government seeks stronger mechanisms, such as the newly introduced electronic billing system, to increase tax compliance without raising taxes. “Fiscal consolidation through increased domestic revenue mobilisation and expenditure prioritisation to close the fiscal gap and reduce reliance on external donor support remains key objectives of government’s medium-term fiscal strategy. “If we implement job-creation measures to formalise the current informal sector, and increase the tax efficiency measures, then government’s targets will be more realistic,” Sayinzoga said. Although the government plans no increased taxation, it intends to introduce a set of new taxes such as the royalty tax on minerals to widen its revenue base, according to the Budget Framework Paper. The framework paper made public doesn’t detail sector allocations. If passed, the royalty tax will be introduced at the rate of 4 per cent of the value of extracted minerals on basic metals and 6 per cent on both precious metals and precious stones.The minister in charge of Cabinet Affairs, Protais Musoni, said the budget framework was presented against the backdrop of continued challenges in the global economic environment, which the national economy had withstood. “The 2013/2014 fiscal year budget is consistent with the medium-term framework. It takes into account the lower budget support funds than we previously expected through adjustments in spending allocations,” Musoni said. “The main objective of this budget, especially in the face of declining aid, is to increase domestic tax revenue collections by 0.2 per cent of GDP and limit the domestic debt to 0.6 per cent of GDP.” Sayinzoga added that although Rwanda experienced shocks presented by delayed donor disbursements in budget support, government adopted tight fiscal and monetary measures to cut domestic spending and contain inflation. GDP growthDespite a modest slowdown in economic activity during the second half of the year–largely because of the delay in donor disbursements–real GDP growth in 2012 was 8 per cent, according to statistics from the Ministry of Finance.Other than delay in aid, the July 2011-December 2012 budget was implemented without the expected increase of receipts from the international issuance of sovereign bonds, thus causing the postponement of part of its utilisation to 2013. The economy was largely driven by the expansion of the service sector, particularly communication and transport activities, which expanded by 19 per cent, while construction recorded a robust 15 per cent growth. Expansion of credit to the private sector, amounting to 33.8 per cent, was one of the main drivers in the services and industry sectors. Agricultural production, mainly of food crops, grew by 3 per cent; however, production of tea and coffee, declined by 9 per cent on account of adverse weather conditions.Rwanda’s external public debt increased to $1.171 billion, representing16.5 per cent of GDP as of end December 2012, compared to 14.6 per cent in 2011. The increase was largely attributed to higher external borrowing to finance the construction of Kigali Convention Centre (KCC) and the expansion of RwandAir fleet.

National

Budget to increase to Rwf1.6 trillion