Budget projection to cushion economic shocks

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Budget projection to cushion economic shocks

Rwanda’s economic performance for the financial year 2013-2014 will not be affected by the financial uncertainties caused by the recent suspension of donor aid, according to Finance Minister, Ambassador Claver Gatete.

Tabling the tentative 2013-2014fiscal-year budget to both members of the Lower Chamber and Senate, May 14, 2013, Gatete predicted that the country’s economy will remain stable.

The budget frame work paper that has already been approved by cabinet shows that government spending will increase from Rwf1.4 trillion to 1.6 trillion in the 2013/14 fiscal year.

Addressing both chambers of Parliament, Minister Gatete noted that the provisional 2013/14 fiscal budget is aligned to the second Economic Development and Poverty Reduction Strategy (EDPRS 2).

According to the government’s resource allocation plan, Rwf808 billion, representing about 50% of the total fiscal budget, will be spent on the second Economic Development and Poverty Reduction Strategy (EDPRS 2) thematic areas. These include economic transformation, rural development, productivity and youth employment as well as accountable-governance.

Fund allocation

Most funds amounting to Rwf818.8billion (50%), have been allocated to economic transformation and poverty reduction by the year 2017.

Economic transformation was allocated Rwf511.4 billion (31%), to be used to improve agriculture, increase exports, develop infrastructure and create farm jobs through creation of secondary cities.

Rural development, with Rwf161.4 billion (10%) allocation will be channeled to integrated land approach to land use and rural settlement, increase in agriculture productivity, integrated social protection programs and connecting rural populations to economic opportunity through improved infrastructure.

While productivity and youth employment pillar will take up Rwf104.5 billion (6%) and it will be used to increase off- farm jobs, develop skills and link them to labor markets.

Apparently Rwf40.8 billion (3%) allocated to accountable governance will be used to strengthen citizen participation in delivery of development, improved accountability, service delivery and security.

The expenditure plan will also allocate Rwf676.2 billion which is equivalent to 42% of the total provisional budget to strengthen foundational issues that have already been achieved in EDPRS1. These include: macroeconomic stability, universal access to primary health, education, rule of law and proper management of public funds among others.

However for the above allocations to be expedited properly, the budget has allocated Rwf32 billion (8% of total provisional budget) for support functions such as coordination, diplomatic activities among others.

Issues at hand

Members of both parliaments probed the finance ministry for assurance on mechanisms of how the country has and will fair especially at the time when the donor countries have suspended aid to Rwanda.

The minister said that the country has managed to cushion the financial hiccup since 2012 and besides the untimely aid cuts and world economic crunk, Rwanda has survived the test and its economy has instead grown to 8%.

Gatete also noted that the government has managed this turmoil, by selling it government treasury bills- which were bid for over $400million and the development programs have continued to be implemented at a good pace (80%), while more organizations like the World Bank have chipped in along with other donor communities like China.

The parliament also probed the ministry on the issue of increasing complaints from the business community on high taxations rates, which have allegedly resulted to some business operators either withdrawing or threatening to pull out of business.

However, the minister said that the taxes have been essential in absorbing the economic shocks, but there are more constraints that have surrounded the taxations bill, since Rwanda is a landlocked country.

Gatete said that this year’s fiscal budget will focus on increased exportation to cover the gap created by the dependence on imports from other countries.

In a related development, the World Bank on May 14, 2013 approved a grant of US$50 million to support Rwanda’s efforts to improve decentralised service delivery. Rwanda is also expecting some more financial support from other countries, such as China- that will enable the country to work within its budgets targets.

 

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About the author

Based in New York, Patrick is a Wall Street Broker and Financial Pundit. He works as a Foreign Consultant for Rwanda Eye. His insights on the current economic trends and its impact on Rwanda and Africa, makes him an invaluable asset to Rwanda Eye.

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