Rwanda’s total debt grew to Rwf 761 billion by June 2011, up from Rwf 617 billion at the end of the 2009/10 fiscal year, the Finance minister said yesterday.
John Rwangombwa was speaking during a press conference to elaborate on the recent approval, by the Cabinet, of the Consolidated Financial Statements for the 2010/11 financial year.
The minister observed that the debt increased because, as the economy grows and the country’s institutions develop, grants from the African Development Bank and the World Bank reduced, and instead the country had to repay part of the debt incurred previously.
He noted that foreign debt was double the domestic one.
The minister projected a further increase in the country’s debt by the end of the 2011/12 fiscal year, saying the government will continue to borrow more money to finance development programmes.
He, however, said that Rwanda remained in position to repay all her debt, adding that the country services its debt to the tune of Rwf33 billion each financial year. Rwangombwa observed that the country remains debt worth, with a Net Present Value (NPV) to export ratio remaining way below 100%.
Rwangombwa argued that a country only needs to get worried about debts or borrowing more money if her NPV exceeds 150%, as measured through the various indicators on debt sustainability. Rwanda was rated at 92% the last fiscal year, he added.
“When you are above 150% you need to begin getting worried about your debt. Last year, we were at 92% and our projection going forward even beyond 2015, we will still be around 15% for our NPV to export ratio,” Rwangombwa said.
He added that the country’s debt to GDP ratio remained below 20% which puts it in a comfortable position to even borrow more money.
Meanwhile, the minister said the country’s economy will continue to grow steadily despite a projected deficit in government spending in the 2011/12 fiscal year, as well as the expected effects of the global economic turmoil.
Rwangombwa said that the government generated revenues totalling Rwf 1.176 trillion in the financial year that ended June 30, compared to Rwf 990 billion in 2010, reflecting an increase of 18 percent.
He attributed this to proceeds from the sale of government’s shares in BRALIRWA, the country’s leading brewery.
He pointed out, however, that in the same year, government expenditure stood at Rwf 1, 206 trillion, against the previous year’s Rwf 974 billion, reflecting a deficit of Rwf 29 billion while a surplus of Rwf 17 billion had been realised in 2010.
“There was a tremendous increase in revenues but also in expenditure. There was also an increase in domestic revenues buoyed by the sale of government shares in Bralirwa, while the government had to borrow more money to fill the gaps in the budget.”
“The deficit realised in the last financial year is not a big issue because in the past years we have been realising surpluses. Government dividends increased to Rwf 4.35 billion, from Rwf 4.06 billion in 2010,” Rwangombwa added.
Domestic revenues amounted to Rwf 510 billion or 45% compared to external revenues which amounted to Rwf 471 billion or 40%, he said.
On public spending, the minister said that systems that track every public penny had been installed as part of the Public Financial Management (PFM) systems reforms.
In particular, he cited the automation of budget agencies within the government and ICT based financial accounting and auditing systems under the Integrated Information Systems (IFMIS) programme.
The minister also talked about the state of inflation which rose from 0.2% at the end of 2010 to 7.5% at the end of August, before reducing to 6.6%. He attributed the trend to increasing food and commodity prices.
The finance minister, however, noted that Rwanda remained more stable compared to its neighbours in the region who have already entered double-digit inflation, attributing this to a bumper harvest realised during the last season.
Nonetheless, he said the country will be affected by the economic situation in the region, especially since she imports large quantities of goods from her neighbours.