On the 15th October James Musoni the Finance Minster read Rwanda’s 2008 Budget. On top of showing continued economic stability revenue collections is projected to increase. The budget underlined Rwanda’s continued economic stability, at 6.6 per cent growth rate per annum. Meaning Rwanda’s economy remains not only among the most stable but highly impressive in the Sub Sahara region.This growth is expected to be stable in the next three years averaging 7.3 by 2008, while inflation will be reduced form the current 8.5 to 5 per cent by 2010.Tax revenue continued its steady performance.This impressive performance came at the cost of reduced disposable incomes on employees. They had to dig deep into their pockets to pay the PAYE, VAT and Excise Duty, for licenses and fines. At the close of the financial year, the Rwandan tax payers forked out a 12.8 per cent contribution to the total GDP in 2007.The country’s tax body collected Frw124.6. This was more by Frw15.2 billion, according to the projections. The increase in tax revenue prompted the Finance ministry to spend slightly more on hiring teachers and health personnel in districts. While domestic capital funds increased from Frw53.2 billion last year to Frw56.8 billion. Part of this money will help farmers in cooperatives to purchase fertilisers and improved seeds.This is part of government ongoing programme to empower Rwandans in the war against poverty.The industrial and the service sectors registered high growth levels to offset the dormant agricultural sector. Also the country registered a steady growth in secondary and tertiary sectors (especially tourism), boosting revenue collections and spurring economic growth in the financial year that ended. But heavy dependence on primary commodities remains a common feature of production. Exports are therefore limited and there are few jobs to expand the investment multiplier.In the agricultural sector, weather conditions as well as export commodity prices remained largely favourable despite drought in the region. Budget experts say the good performance of the economy is a result the growing construction industry, trade within the East African Community (EAC), and the highly impressive tourism sector. Nevertheless, the good performance rates are dwarfed by high inflationary rates at 8.4 per cent. The inflations has made renting a house and paying for medical bills expensive.Heavy dependence on primary commodities remains a common feature of production.Exports are therefore limited and there are few jobs to expand the investment multiplier.This is not helped by shortages in the energy—hurting the economy and triggering inflationary gaps in other sectors, at 8.4 per cent—compared to 9.2 per cent in August 2006. Consumers today are paying much more for education, health, water and electricity. Once again the bad weather pattern negatively influenced the agricultural output. It is estimated that total harvest fell by 1.3 per cent as compared with 2006. Trade deficits remain high at 30 per cent of GDP largely because of low exports dwarfed by expenditure on imports at 24 per cent. This was not helped by the continued slump in the prices of coffee and tea—Rwanda’s primary exports on the international market. However the mining sector registered good performance. On the monetary policy, the budget indicates that the sustained shortages in the energy sector have continually hurt the economy and led to inflationary gaps in other sectors. However, the central bank is regulating the financial sector to tame inflation. The inflationary pressures are mainly linked to higher increases in the prices of foodstuffs which rose up to 30.5 per cent as well as of energy 14.4 per cent and the increase in energy sparked off a general price increase of other products.ManufacturingThe manufacturing sector is expected to continue its impressive growth, and will even be better after the methane gas project in Lake Kivu is completed in 2010. It is estimated that an extra 25 mega watts of power will be produced and connected on the national grid. It is hoped that the production sector will expand with benefits from increased power supply at lower prices. The tertiary sector especially is expected to perform well, forecast at 8.0 per cent growth.This reflects Rwanda’s emphasis on the deepening the financial services sector.The expansion of the services and industry at a faster rate than the agricultural sector is therefore proof that the economy is increasingly becoming monetised and moving away from subsistence agriculture. It is expected that as the agriculture sector becomes more productive there will be more opportunities for employment in other sectors of the economy.EducationThe government has increased spending in the education sector. The aimed to provide more books in schools and other scholastic materials. Special emphasis will also be put on vocational training and skills development as three vocational training centres will be established during the year.On the strength of a more robust economy, higher tax and export revenues, the minister increased allocations to the power sector, the prosperity for all scheme, pension arrears, the rehabilitation of health centres, water systems and road works. SpendingGiving projections on how money will be spent next year, Musoni said he would put much more investments in building infrastructure (construct roads, rehabilitate power plants and pay for feasibility studies for a new international airport and a railway line connecting Rwanda to Tanzania), free primary education parliamentary elections. The minister further said the economy faces constraints of a weak private sector, unnecessary population growth rates and a weak agricultural sector. Total government expenditure for 2008 is expected to be Frw607.5 billion, with domestic revenue projected to be 46 per cent—the rest will come from development partners.With all those programmes, the minister said the Government’s focus would continue to be on maintaining high economic growth, low inflation, a sustainable external balance and macroeconomic stability through fiscal discipline. Ends
