How Rwanda will raise resources for 2020/21 budget

A teller counts money in a bank. The government’s borrowing will increase next fiscal year with revenues expected to drop. File

The government expenditure is expected to rise in the coming fiscal year [2020/2021] by about Rwf 228 billion. The total expenditure for the year is estimated at over 3.2 trillion. 

 Rwanda has set out strategies to mobilize the resources, here is how. 

 

The key sources of capital are taxes, loans and grants. Another revenue stream is from non-tax collections such as visa charges, traffic fines and licenses. 

 

However, following the COVID-19 pandemic, tax resources are expected to drop business operations had come to a halt during the lockdown.

 

Total taxes for the next fiscal year are projected at  Rwf 1,421.4 billion which is lower compared to the year ending June 2020

According to the Minister for Finance, Uzziel Ndagijimana, the decline is a result the COVID 19 pandemic.

“This projected amount for the fiscal year 2020/21 reflects the trend of other macroeconomic variables envisaged in the FY2020/21,” part of the budget framework paper reads.

Non-Tax revenue collections are also expected to drop by about 20 percent compared to the current fiscal year. This is partly due to the cancellation of entry visa fees and lower reimbursements from peacekeeping missions. 

In addition to domestic revenues, the government will also seek credit estimated Rwf 783.4 billion. This is Rwf 210 billion higher compared to the fiscal year ending in June 2020.

According to the Ministry of Finance, public debt will be maintained at a manageable level as pointed out in the latest Debt Sustainability Analysis (DSA) conducted in March 2020.

However, given the impact of COVID-19,  maintaining recommended debt levels will require careful monitoring and strengthening, and spending prioritization.

Rwanda’s Present Value of debt-to-GDP is expected to remain below the 50 percent of GDP threshold.  By the end of 2020, the Present Value of debt-to-GDP is projected at 31.1 percent. 

Minister Ndagijimana’s told parliament on Thursday that as the government strategy will focus on keeping public debt at a manageable level.

The government, he noted, will also seek to maximize concessional funding which has lower and fixed interest rates.

Non-concessional borrowing which is more expensive and short term will only be used for targeted investments with high economic impact and within the limits of Debt Sustainability Assessment.

COVID-19 is estimated to cost the Government over Rwf882 billion over two fiscal years.

cmwai@newtimesrwanda.com

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