With the New Coronavirus outbreak expected to slow down Rwanda’s economic growth and targets, the government is set to increase national spending by 7.5 percent, with the country’s budget increasing from Rwf2,876.9bn in the 2019/20 fiscal year to Rwf3,245.7bn for the 2020/21 financial year.
This was revealed by the Minister of Finance and Economic Planning, Dr Uzziel Ndagijimana while presenting the Budget Framework Paper (BFP) for the 2020/21 fiscal year in Parliament.
Minister Ndagijimana told the legislators that the government has anticipated that economic growth in 2020/21 will decline from 9.4 percent in 2019 to 6.3 percent and rebound to 8 percent in 2022, a disruption attributed to COVID-19, with the impact expected to last at least two years before the economy recovers.
Minister Ndagijimana told Members of Parliament that the budget for the fiscal year 2020/21 will reflect medium-term fiscal path which allows for increased spending to reach National Strategy for Transformation (NST1) goals while maintaining public debt at sustainable levels.
“The proposed total resources estimated for fiscal year 2020/21 amount to Rwf 3,245.7 billion. This amount is made up of Rwf 1,605.7 billion of domestic tax and non-tax revenue, external grants of Rwf 492.5 billion and external loans of Rwf 783.4 billion,”
“Total tax revenue collections are projected to reduce to Rwf 1,421.4 billion in 2020/21 which is Rwf 147.6 billion short of Rwf 1,569.0 billion projected in the 2019-20 revised budget. The decline in tax revenue collection is a result of the economic effects of COVID-19 pandemic,” Dr. Ndagijimana said.
The Minister said that non-tax revenue collection is estimated at Rwf 184.3 billion which is Rwf 48.6 billion lower than Rwf 232.9 billion estimated in the 2019/20 revised budget.
“Fiscal year 2020/21 total spending is projected at Rwf 3,245.7 billion which is Rwf 228.7 billion higher than revised budget estimates of Rwf 3,017.1 billion. The figure is made up of recurrent expenditure of Rwf 1,582.8 billion, capital spending of Rwf 1,298.5 billion and net lending outlays of Rwf 306.5 billion,” he said.
While presenting the BFP, which is a document outlining government economic policies over the medium term that helps lay the foundations of the next fiscal budget, Dr Ndagijimana said that the government has put in place a fund of up to Rwf100bn that will go towards supporting businesses and other struggling sectors of the economy suffering from COVID-19 impact.
Minister Ndagijimana noted that while Government continues to implement measures to promote exports diversification and reduce exposure to external shocks and imbalances over the medium term, economic challenges posed by COVID-19 outbreak called for particular actions for quicker response.
“Following emergency spending on health and social assistance towards the end of 2019/20 financial year, the 2020/21 budget will address short and medium-term economic consequences of COVID-19 on businesses and individuals. GDP growth is expected to be lower but with the right policies in place, it is likely to bounce back to around 8 percent by 2022,” Minister Ndagijimana said.
Key priorities for the 2020/21 national budget will focus on strengthening the health system, increasing agriculture and livestock productivity, scaling up social protection coverage, creation of employment opportunities through investment in public works and support to micro, small, medium and large enterprises affected by COVID-19.
Other interventions will include supporting Made in Rwanda, promotion of digital technologies to improve service delivery; improving access to quality education; eradicate malnutrition and stunting and strengthen disaster preparedness and management.
The country is expected to approach lenders for more money to inject in the economy, particularly sectors that have been affected by COVID-19 such as aviation, tourism, hospitality and others.
Development partners will contribute 15.2 percent to the 2021 budget while the rest of the resources will be mobilized domestically through revenue collection and borrowing.
Last month, President Paul Kagame mentioned that Rwanda would consider different options, including borrowing to cushion the economy from the COVID-19 impact.
Among other things, the government will inject at least Rwf145bn in the national carrier Rwandair whose operations have been crippled by New Coronavirus. Dr Ndagijimana said that the investment will be made with the hope that flights will resume soon.
The airline has resorted to cargo services to sustain operations as borders remain closed and inbound and outbound flights still on hold to contain the spread of COVID-19. The airline has taken several austerity measures including reducing salaries by between 8 percent and 65 percent to minimize losses.
The government will channel at least Rwf100bn through commercial banks to go into companies and businesses impacted by New Coronavirus through short term and long term low-interest loans to resuscitate the economy.