With the 2009 mini budget expected to be tabled before parliament either this week or next week, government is to spend only 0.5 per cent of it on debt refinancing.
According to James Musoni, Minister of Finance and Economic Planning, ever since Rwanda was granted Heavily Indebted Poor Country (HIPC) status and the benefits of debt relief as a result, the external debt burden has significantly reduced.
Rwanda is among the twenty seven Sub-Saharan Africa countries that have so far received a combined $54 billion in aid for debt relief.
Musoni said that Rwanda’s loan financing decreased from 22 per cent of the budget in 2000 to 14 per cent in 2003 and it is estimated to decline 7 per cent in 2008 and in 2009 it is estimated at 0.5 percent.
In is also estimated that Rwanda’s Gross Domestic Product (GDP) this year has remained at 8.5 percent, believed to be driven by good performance of the agriculture sector.
The agriculture’s share of nominal GDP increased from 36 per cent in 2007 to 38 per cent in 2008.
According to the Ministry of Agriculture, the sector improved following government policies to increase the availability, accessibility and affordability of fertiliser to farmers and using certified seed.
“Agriculture is a crucial sector as it is the major source of income for most Rwandans and has a vast potential for poverty reduction,” Musoni said.
A big portion of next year’s mini budget is also expected to be financed through by tax revenues.
Last year Rwanda Revenue Authority collected $450 million (Frw246.9 billion) from taxes on goods and services.
This year the authority projects to collect Rwanda’s $490 million (Frw268.9 billion).
“These big cuts in loan financing are associated with the decision of the government of Rwanda to carefully contract new loans following the multilateral debt relief initiatives to avoid another round of debt trap,” he said.
The industrial sector is expected to achieve 14.6 per cent growth for 2008 which is higher than the 10.22 per cent growth for 2007.
Construction is the main driver of growth in this sector due to large public projects such as the methane gas project and private sector investments in hotels and private housing.
The services sector which has been rising steadily in the past is projected to rise slowly at around 4 percent as ‘wholesale and retail trade’ and ‘hotels and restaurants’ performance settles down from higher rates in 2007.
This time financial services, tourism transport and communications are believed to be the main drivers of the services sector unlike in the past when wholesale and retail trade dominated the share of sector.
The sector growth will mainly be driven by a rapidly growing financial and insurance sector which will benefit from the government’s Financial Sector Development Plan.
However high transport costs, rental costs as well as fuel prices have undermined the growth of the services sector.
Overall exports are expected to grow by 25 per cent in 2008. The 2008 exports have grown strongly with international prices of coffee, tea and minerals increasing.
Coffee, casserite and coltan production have increased in response to price rises and export promotion strategies.
Musoni added that the increasing demand for imported goods is causing the trade deficit to widen with imports rising faster than exports at 42 per cent growth in 2008.
He said that this trade deficit is financed by inflows of donor funds.