The ministry of finance has proposed a Budget Framework Paper (BFP) that will see the country increase its revenues and tax collection so as to recover from COVID-19 crisis in the next financial years.
The BFP for financial years 2021/22 and 2023/24 were tabled this Wednesday to both parliament and senate houses and will be officially presented to both houses next month after committee reviews.
The budgets projection of Resources shows total resources estimated for the fiscal year 2021/22 will amount to Rwf3, 807.0 billion from the current revised budget of Rwf3, 464.8billion.
In 2022/2023 the budget is expected to increase to Rwf4, 253,7billion and in 2023/2024 fiscal year increase to Rwf4, 444,4billion
“The increase in the tax revenue collection is due to the current economic situation with the effect of the gradual economic activities that have started to recover from COVID-19,” said Richard Tusabe, the Minister of State in Charge of National Treasury who presented the projections.
Tusabe said that the outlook is for a gradual recovery in economic activity from the drop of 3.4% in 2020, to a projected growth by 5.1% in 2021, 7.0% in 2022 and on average by 7.8% 2023 and 2024.
“This growth projection reflects the actions already in place or that will be put in place by government to mitigate the economic impact of COVID-19, by providing support to vulnerable households and stimulate employment by supporting investments from the private sector.” Minister Tusabe said.
Basing on the Office of the Auditor General’s compliance report 2020, Lawmakers were not impressed by the increase in budget accountability and questioned why the increment when many government funded projects are still poorly managed and funds unaccounted for.
For example the OAG showed that close to Rwf5.7bn in the 2020 financial year was not accounted for and of the 175 audited entities53% obtained unqualified audit opinion in the financial audit, while in compliance with laws and regulations, and value for money, 32% obtained unqualified opinions.
Senator Ephrem Kanyarukiga said that there is a clear issue of unexplained poor accountability when only 47% implement OAG recommendations of the institutions evaluated.
“I think that before we give these institutions another budget, we should have an explanation why they are advised by the OAG and don’t implement the recommendation? Then if we are satisfied with their explanation, we give out another budget line,” Senator Kanyarukiga said seeking the finance ministry to take action.
Senators and MPs said that the fact of poor planning and contract management in budget as showed in the OAG reports should be a task for the ministry of finance (as source of money disbursement) to ensure this phrase of poor planning never to appear in the OAG’s statement.
MPs Frank Habineza, Théogène Munyangeyo and Leonard Ndagijimana were concerned that the increased budget will put pressure on livelihood of citizens, creating inflation since it was largely depending on domestic revenues and faced with a drop in donor budget support.
The 2021/22 budget projection will be made up of domestic revenues amounting to Rwf1, 993.0 billion- which will comprise of Rwf1, 717.2 billion from tax revenue and Rwf275.8 billion from other revenue collection.
External grants are estimated at Rwf612.2 billion whilst external loans of Rwf651.5 billion is envisage to accrual to the Treasury.
MP Ndagijimana said the tax and revenue increase in services and taxes could be a reason that will make life hard and expensive to Rwandan and also a reason for increased foreign debts which will create a cycle of increase in taxes in all areas of life.
When will this budget be stable? It is evident we are largely funding non-productive sectors which is affecting the livelihoods so expensive to afford,” Ndagijimana said.
MP Munyangeyo suggested that government needs to put taxes in different categories since statistics show Rwanda taxes are very high compared to others and yet research indicates that a reduction in taxes increases investment.
“We cannot recover because of the high taxes, but we can have a new reform in the tax regime where we categorize taxes in small, medium and large tax payers or taxes spread in three years payment. This way some will be able to recover,” Munyangeyo said.
In response Tusabe said the budget increase is not a problem but a solution since it will help Rwanda to return to the growth rate as before Covid-19 especially that majority of the budget lines are in long term investment- in economic and social transformation.
He also assured lawmakers that the ministry will take administrative measures on organs that don’t implement the OAG recommendations but alongside internal reforms on budget and projects management inside the ministry
“We need to change starting within the ministry and that is where we are putting more efforts as in the new structure we have a new division of investment which will follow the projects from planning to implementation and execution instead of coming at the end,” Tusabe said.
The budget for the fiscal year 2021/22 reflects the medium term policies to accommodate and support spending needs under the Economic Recovery Plan and Economic Recovery Fund; the total net wage bill increases in line with new recruitments of teachers and health workers, restructuring of the civil service to improve central government service delivery; spending for the rollout of vaccination campaign program.