Bankers want more government spending
As the national treasury prepares to announce its allocation of resources to the economy, the banking sector is anticipating more government spending.
A few bankers who spoke to The New Times spoke on Wednesday urged government to increase expenditure to solve the prevailing liquidity pressures.
In an interview with Business Times, Eugene Murigade, the Head of Consumer Banking at FINA bank said that he would like to see government ejecting more money into the economy.
“Though I have less detailed information concerning the budget, we hope the government will spend more. The more money, the more economic activities we will have taking place which favours the business community,” Murigade said.
The banker also noted that his bank (FINA) already has a glimmer of hope with increasing deposits in the recent past.
“The situation is improving and we expect it to get better.” Murigade said.
According to World Bank, Rwanda would be experiencing second order effects that include a liquidity crisis as an effect of the global financial crisis.
The financial institution recently announced an increment of its grant to Rwanda of an extra $172 million before the end of June this year to address the liquidity crisis in Rwanda.
Another banker, who preferred to remain anonymous because he is not authorised to speak on behalf of his institution told Business Times that, “more government spending will be a blessing” in the next financial year.
He pointed out that given the “bad experience” the sector has experienced since the beginning of the year, the situation can only be normalised if government intervenes and increases financing in form of concessional loans to commercial banks from the Central bank.
According to the draft budget presented recently by the Minister of Finance, James Musoni to parliament, government is likely to increase spending by almost 9.5 percent to Rwf 812.4 compared to Rwf742.2 billions it spent in 2008/09.
Rwanda’s 2009/10 fiscal year will be the first to align with the East African Community (EAC) budget calendar, since the country joined the economic bloc three years ago.
Now Rwanda will be reading its budget at the same time with Tanzania, Kenya and Uganda. Burundi is yet to align to the EAC calendar.
Parliament recently adopted a law that allowed government to run a $784m mini-budget for the transitional period of six month from 1st January 2009, before her adoption of the EAC budget calendar.
Commenting on the allocation to agriculture, Peterson Muvara, Chairman Horticulture Development Authority (RHODA) said there are some changes in certain lines of horticulture budget, which are for the good of the economy.
“Government has reduced financing on travelling and consultations but increased funds for (agricultural) development,” he explained.
Muvara added that increase of development funds was aimed at making the sector more sustainable as the economy moves towards being self-sufficiency.
Agriculture is expected to grow by nine percent, a drop from the 15 percent registered in 2008.
Officials from Rwanda Animal Resources and Development Authority (RARDA) said they were optimistic of an increase in money allocated to its programmes.
“The allocations for agriculture will definitely increase, considering the sector’s importance to economy development. I therefore don’t expect any decrease in the budget at all,” said the Director General of RARDA, Dr Théogène Rutagwenda.
The Private Sector Federation (PSF) said there are four major areas that this year’s budget should address including taxes, the financial issues, public expenditure focus and regional integration issues.
“Creating an enabling business environment. Priority should go towards development of physical infrastructure especially energy generation, road and railway transport. Rwanda must also increase its exports base to ensure a healthy balance of trade and payments through a competitive private sector,” it added.