As government moves to slash foreign aid
Though foreign aid still constitutes a significant percentage of Rwanda’s budgets, the government is gradually cutting down on donor funds.
The country’s budget has also increased considerably as it moves to accelerate its economic development initiatives.
In the 2016-2017 fiscal year, Rwanda increased its national budget to Rwf1.95 trillion (US$2.49 billion) from Rwf1.81 trillion (US$2.31 billion) in 2015-2016.
Rwf 517.1 billion (US$659.29 million), the lion’s share, has been allocated to capital projects under the second Economic Transformation and Poverty Reduction Strategy.
Rural development will take Rwf 256.5 billion (US$327.03 million), Productivity and Youth Employment has been allocated Rwf 106.0 billion (US$135.15 million), whereas Rwf 192.2 billion (US$245.05 million) will go to Accountable Governance.
Presenting the budget in Parliament, the Minister of Finance and Economic Planning, Claver Gatete, said the government will finance 62.4 per cent of the 2016-2017 budget through domestic revenues, which amounts to Rwf1.22 trillion (US$1.56 billion), representing an increase of Rwf40.9 billion (US$52.15 million) compared to Rwf1.18 trillion (US$1.5 billion) spent in 2015-2016.
The balance of the budget, Gatete said, will be funded by external resources, which is currently estimated at Rwf733 billion (US$934.56 million), representing a Rwf99.7 billion (US$127.11 million) increase compared to Rwf 633.3 billion (US$807.44 million) in the 2015-2016 revised budget.
“External resources will come from budgetary grants, project grants and foreign borrowing,” says Gatete.
Additionally, the 2016-17 budget theme, “Fostering growth while increasing exports and boosting made in Rwanda goods and services” signals government’s commitment to tackle dwindling commodity prices and the rising import bill that have adversely affected export earnings and piled pressure on foreign exchange reserves.
To this end, the government has put in place medium term policy adjustments to mitigate the effects of external pressures. It has requested financing from the International Monetary Fund (IMF) Standby Credit Facility amounting to Rwf 159.22 billion (US$ 203 million) to help keep external reserves above the critical level of three months’ worth of imports during this adjustment period.
“While the external financing from the IMF is only temporary, it will ensure implementation of all extensive medium term policies aimed at addressing the external imbalances as laid out in the latest national export strategy,” says Gatete.