Finance and Economic Planning minister Claver Gatete, yesterday, submitted to Parliament the 2016/17 Budget Framework Paper, with the estimates seeking to increase the National Budget up to Rwf1,949.4 billion.
Presenting the Budget Framework Paper that would increase the next budget by at least Rwf140.6 billion, Amb. Gatete said Government will need extra financial support from the International Monetary Fund to balance trade.
In January, the Government had revised the current Budget upward from Rwf1,768.3 billion to Rwf1,808.8 billion after a financial boost from external development partners, mainly the Global Fund and World Bank.
Explaining the relevance of the Budget Framework Paper, Minister Gatete said Government projected growth in the Budget will be mainly driven by good performance of domestic revenue collections.
“In the prevailing global and regional contexts, we project Rwanda’s gross domestic product (GDP) growth to average 6 per cent over 2016/17 before recovering strongly in 2018 and beyond, while inflation remains subdued below 5 per cent,” he said.
The minister told lawmakers that 2016/17 financial year total Budget constitutes domestic revenue collections that are estimated at Rwf1,182.4 billion, which is Rwf133.8 billion higher than the Rwf1,048.6 billion collected in the last Revised Budget.
On the other hand, the grants in total will be reduced from Rwf374.7 billion in the last revised budget to Rwf365.3, billion, translating to Rwf9.4 billion reductions against the last Revised Budget, an effect he attributed to Government spirit of reducing external aid dependency despite persisting slumps of the global economy.
Recurrent expenditure, according to the minister, is projected at Rwf973.1 billion compared to Rwf893.4 billion in the 2015/16 in the Revised Budget, while the development budget is estimated at Rwf770.9 billion, representing Rwf5.4 billion compared to Rwf776.3 billion in the 2015/16 Revised Budget.
To address the impact of economic shocks on the domestic economy, Minister Gatete said the Government will aggressively promote export promotion and import substitution measures such as Made-in-Rwanda drive.
In a drive of imports substitutions Amb. Gatete said 6 per cent of development budget would be spent on developing textiles, garments and leather industry, add value to minerals, coffee and increase tea production, which would also operationalise horticulture, livestock products and services exports as well as expand the export growth fund.
However, in the event where exports are not growing fast enough to catch up with imports, the gap, according to Minister Gatete, would, in normal circumstances, require short term credit facility which is provided by the International Monetary Fund (IMF).
MP Juvenal Nkusi, the chairperson of the parliamentary Public Accounts Committee, said Rwanda had earlier resolved to seek IMF intervention only when it is about technical support.
But Gatete stated that the yet-to-be-disclosed financial support will only help central bank to sustain foreign currency reserves to balance imports and exports.
Measures to fluctuations
Minister Gatete said reserves will be helpful and that they are part of preventive measures against any unpredictable fluctuations that might arise in the usual four months period of imports in terms of reserves, which as well help to maintain the continuous economic growth.
According to the minister, revenue increase will amongst other things be export based and Government, through its investment projects, would make sure there is a sustainable and increasing production to reduce the amount of imports.
“Whether it is exports to provide sustainability or imports substitution, which equally provides sustainability, all require a certain amount of time, it can’t happen overnight, it takes time to produce and another time to export, thus requiring a short-term facility in terms of balance of payment,” he said.
“So, once you see the numbers, the difference between imports and exports you say, let me try to avoid the problem, unless you tell Rwandans not to import anything so that you can balance, but since we need production and growth, we cannot stop them, because most of the things are not produced here,” Amb. Gatete said.
In their reactions, legislators’ interventions evolved around Government strategies to reduce the balance of payment through increase in exports, industrial development, savings culture and efforts to reduce donor dependency.
They commended and approved positive projections from the budget framework paper.
The Budget Framework was approved as a bill and it will be subject to more scrutiny at the parliamentary committee level, specifically in the committee in charge of Budget and National Patrimony before it is signed into a law ahead of the next financial year.