PARLIAMENT - The Minister of Finance and Economic Planning, John Rwangombwa, has revealed that market prices are projected to increase from 5.7 percent in the 2009/10 fiscal year to 7.2 percent by the end of the financial year 2010/11.
He made the remarks while presenting the 2010/11 Budget Framework Paper (BFP) before a joint Parliament session, yesterday afternoon.
The document reveals that total expenditures will increase to Rwf952.6bn compared to the previous budget expenditure of Rwf849bn.
Justifying the increment of the market prices, Rwangombwa said; “There will be increase of money in circulation and a lot of activities are expected to be undertaken which puts the projected increment to 7.2%.”
“Also, there was a sharp fall in prices of agricultural products and by the end of this financial year, we expect it to normalize, hence the increment,” said the Minister.
He, however, hastened to add that the government’s plan is to have the increment normalized at 5 percent.
The Minister’s explanations followed several concerns raised by the MPs and Senators over market price increment.
Rwangombwa elaborated that an increase in the market prices that is below 10 percent cannot affect the performance of the economy.
“A fall in market prices stipulates a dull economy while an increment shows a vibrant economy,” Rwangombwa said.
The Minister said that the final budget is expected to be presented on June 10. The spending plans cover the period from July 1, 2010, to 30 June 2011.
Some of the key issues the Minister highlighted include 7.8% increment of agricultural products in this fiscal year compared to a 7.1% registered in 2009/10. Industrial production will increase to 7.3% up from 4.1%.
According to the paper, the total recurrent expenditure will represent 58.3 percent of the total expenditure and net lending, leaving a development budget representing 41.7percent.
It also indicates that development expenditure is projected to rise from Rwf 331.9bn to about 397.7bn.
The overall fiscal and financing is expected to rise sharply from Rwf77.8billion to Rwf 140.3billion, however, the document indicates that the budget deficit is projected to decline thereafter.
The widening budget deficit in 2010/2011 implies a drawdown of government deposits in the National Bank of up to 1.1percent of the GDP. This would be covered by the disbursement of World Bank and IDA grants scheduled for expenditure in the last qu arter of 2010.