The Finance Minister will today, present the 2010/2011 budget to parliament, the second to be aligned with the rest of EAC member countries whose financial year runs from July to June.
Kenya, Uganda and Tanzania will also be reading out their budgets today in their respective parliaments.
In the new financial year, government will increase spending to boost economic growth which is expected to rebound to 7 percent this year, after reaching 6.5 percent last year.
Economic growth is expected to accelerate further to 8 percent in 2011. “Spending plans will continue to reflect Economic Development Poverty Reduction Strategy (EDPRS) priorities, particularly focusing on priority programmes aimed at boosting economic growth and, in particular, the growth of exports …,” a budget concept paper from the Ministry of Finance reads in part.
In his maiden budget reading, John Rwangombwa will announce an increase in government expenditure by 10 percent to Rwf952.6 billion in 2010/11 from Rwf849.0billion spent in the last financial year.
As a result, Rwanda’s overall fiscal deficit and financing is expected to rise sharply from Rwf77.8 billion (2.4 percent of Gross Domestic Product (GDP) in 2009/2010 to Rwf140.3 billion.
This will push up the budget deficit to 4 percent of GDP in 2010/11.
Presenting his budget estimates to a joint session of Parliament recently, Rwangombwa said that the fraction of the shortfall in the 2009/10 budget which is equivalent to Rwf38.8bn will be financed through foreign borrowing.
Rwanda will also increase domestic borrowing and draw on her reserves to bridge the deficit by 51 percent or Rwf39bn, the Minister said.
According to a budget concept paper from the Ministry of Finance, the draw down of government deposits will be covered by the disbursement of World Bank IDA grant scheduled for the last quarter of 2010.
External support to this year budget is expected to increase by 26.7 percent with direct budget support from development partners increasing to $ 519 million in 2010 from $ 409.6 released last year.
Financial spending with the national resource envelope is categorized into four clusters; infrastructure, productive sector, human development and social sector as well as the governance and sovereignty cluster.
If no significant changes are made to the draft budget proposal, then Human development, social clusters and governance and sovereignty clusters will take the lion’s share of the budget consuming approximately Rwf305 billon or 31, 0 percent of the entire budget respectively.
Though the current budget draft does not propose any new taxes, the Finance Minister is likely to announce structural changes in the tax regime, to boost domestic revenue.