2010-11 will produce a robust economy
On June 10, government presented the 2010-11 budget to parliament, which addressed removal of bottlenecks to exports of goods and services. Business Times’ BERNA NAMATA caught up with the Finance Minister who gave an insight into the general outlook of budget and what is expected in the 2010-11 financial year.
Below are the excerpts:
You said that implementation of the previous budget was slow. How do you explain this underperformance?
To be specific budget implementation was slow up to March. But from March this year it picked up. Before March we had spent up to 67 percent of the budget that was worrying because we should have been overall at 75 percent.
In terms of capital and recurrent expenditure: recurrent expenditure (salaries, goods and services) was on target at 75 percent.
This can be explained in awarding tenders. When you consider where we are today, towards the end of the budget implementation we are at 95 percent.
What measures have you put in place to improve the absorption capacity in 2010/11?
When we went into the revised budget, we allocated money for projects that were crucial...for instance in agriculture, on irrigation and storage facilities, they came up with plans to implement those programs. We are putting pressure on institutions to start those programs that we have allocated money for.
But in this case (agriculture) they were not very ready with the feasibility studies which they started implementing in January and this contributed to the delay in terms of the overall performance of the budget.
We shall continue to carry out evaluations on quarterly basis to assess their performance and remind them that they are under performing.
Going forward what we have decided; the procurement units especially in big ministries will award tenders. The financial year 2010-11 is the last where RPPA (Rwanda Public Procurement Authority) will award tenders. By then budget agencies will be expected to award their own tenders as large as they may be.
Strengthening their procurement departments will make it easier in stead of preparing documents go up to the tender boards they will be doing it internally as we strengthen their departments. This should make it easier and quicker.
But of course we have to be sure that it is safer and be able to safe guard government resources.
Our budget department is going to be dealing with ministries to try and push them to start the procurement process immediately. This is a message we are also giving them in the trainings we are conducting with the chief budget officers.
How do you view the performance of key sectors like infrastructure, education, health and agriculture in 2009/2010?
They performed well! They take the lion’s share of the budget at 97 percent though it does not mean others are not important. These are very important in our development.
In terms of performance education has been better in terms of planning, implementing their programs and health to some extent.
The budget deficit is widening. Why?
We have big projects that we are implementing today. There are three main projects including the laying of the 2,300km the fiber optic and this started last year we want to see it completed by next year. We have the electricity roll out program to increase household grid connections from 6 percent to 16 percent by 2013.
For this project we have contribution from our development partners but we have government investment as well. We want to have as many Rwandans connected to grid as possible; you can not talk about development without electricity.
The other investment is Rwandair. We want to build it and if possible by 2014 we privatize part of it or the whole of it. We are buying new aircrafts and restructuring it entirely.
We also have big investments in agriculture; we are scaling up the crop intensification programme, consolidating more land, increasing the level of fertilizers. We are also investing in storage facilities and irrigation and this also requires more financing.
This required us to widen our deficit. We decided to widen our deficit because we could borrow from abroad (external); for electricity apart from the roll out there is also the production, so we borrowed to implement that project the Nyabarongo Hydro Power Plant.
And how will government finance the widening deficit?
We are saying that in 2013/2014 all these investments that we are carrying out now will yield results. We expect to get more revenues because if you look at our revenue projections it is almost doubling within the next three years. We are now at Rwf479 billion and we expect to be at Rwf727 billion in 2013/2014.
That gives us more resources for implementing many programmes but also these strategic investments we are making now will be over at that time so that will help us to reduce the deficit.
Economic growth is projected at 7 percent. How realistic is this?
We plan based on our macro economic framework starting with the global economic outlook. The projections we have today are positive around 4 percent in 2010 and 4.5 percent in 2011.
Considering the effects we had in 2009 it was mainly due to external shocks from the world economy. Now that it is improving, with improved performance we expect to see increase in our tourism sector and expect to a significant improvement in our exports.
This year we expect doubling in terms of the output so that gives the confidence that we can achieve these targets ourselves. The sectors which had challenges at beginning of 2009, we have seen them coming up. The issue of credit to the private sector is easing.
We expect that to do better as we go forward. Our banks have been able to arrange for external financing and this is going to give them room to lend for private sector investment.
What has been the impact of the GDP on poverty reduction?
It will be difficult to give concrete numbers now because to assess and know poverty levels of our population; we have to do the household survey. We are starting that this year and we expect to get results by the end of next year.
But when you look at the different programmes we have confidence that we have an improved situation by the end of the household survey. This is because the agricultural programme, the Girinka- “One Cow per household” programme”, the crop intensification programme and then Vision 2020 Umurenge program which is targeting the poor.
This will automatically have a big impact on the population in terms of improving their livelihood.
What is the general outlook of the economy in the new financial year?
In medium term we are going to see continued good performance in agriculture. We are putting more effort and with investment in irrigation. Service sector; we expect to see it picking up as we are finalizing these investments we are making; electricity, fiber optic will support communication, hotels and the convention center.
Our long term objective is to have services rendered from Rwanda to the whole world in terms of communication; we expect in the long run to establish call centres serving the whole world.