Kigali, June 8, 2016-The Minister of Finance and Economic Planning, Claver Gatete, today presented to a joint parliamentary session the budget statement for the year 2016/17. Minister Gatete told parliamentarians that Government will spend Frw 1949.4 billion in the 2016-17 fiscal year, Frw 140.6 billion higher than Frw 1808.8 billion spent in 2015/16.
Government will finance 62.4% of its budget through domestic revenues amounting to Frw 1216.4 billion. This represents a slight increase of Frw 40.9 billion compared to Frw 1175.5 billion spent in 2015/16.
The remainder of the budget will be funded by external resources worth Frw 733 billion (37.6% of total budget). This represents Frw 99.7 billion increase compared to Frw 633.3 billion in the 2015/16 revised budget. External resources will come from budgetary grants (Frw 219.3 billion), project grants (Frw 146.0 billion) and foreign borrowing (Frw 367.7 billion).
Expenditure allocation in the 2016/17 budget and the medium term has been made according to the second Economic Development and Poverty Reduction Strategy (EDPRS2) objectives and a large share has been allocated to the EDPRS2 sectors as follows.
Thematic areas have been allocated Frw 1,071.8 billion representing 55% of the total budget for 2016/17 fiscal year. Economic Transformation takes the lion’s share with Frw 517.1 billion (27%), rural development will be allocated Frw 256.5 billion (13%), Productivity and Youth Employment gets Frw 106.0 billion (5%) and Accountable Governance takes Frw 192.2 billion (10%). The foundational Sector which comprises of health, education, justice, peace, stability, food security, macroeconomic stability and public finance management among others will be allocated Frw 877.6 billion representing 45% of the entire budget.
The Government has enacted fiscal adjustments to curb the fiscal deficit from 5.4% of GDP in fiscal year 2015/16 to 3.9% in 2016/17. Minister Gatete noted that in the 2016/17 budget, adequate resources for priority programs and projects have been catered for. These include vital infrastructure projects that will reduce the cost of doing business, provisions for goods and services for smooth running of Government operations, as well as safeguarding social protection projects and programs to ensure a just society.
“High priority will be given to economic activities which will either increase export revenues or reduce import volumes. The identified key sectors for fostering economic activity include Textiles, garments and leather industry, agriculture export crops, agri-business, construction, livestock, wood industry, minerals, tourism and ICT and trade and investment facilitation,” Minister Gatete said.
Regarding import substitution, the Government has selected key sectors namely cement, sugar, rice and clothing where it believes local production can reduce current imports while on- going export promotion efforts will be supported by the export promotion fund.
Medium term macro-economic policy objectives
The 2016-17 Budget theme ‘Fostering growth while increasing exports and boosting made in Rwanda goods and services’ signals government’s resolve to tackle diminishing commodity prices and rising import bill that have adversely affected export earnings and put pressure on foreign exchange reserves.
To this end, Government has put in place medium term policy adjustments to mitigate the effects of external pressures. It has requested financing from the International Monetary Fund’s Standby Credit Facility amounting to US$ 203 million to help keep external reserves above the critical level of three months’ worth of imports during this adjustment period.
While the external financing from the IMF is only temporary, it will ensure that the implementation of all extensive medium term policies aimed at addressing the external imbalances as laid out in the latest national export strategy.
Key Figures in 2016/17 National Budget
• 62.4% of the budget will be financed through domestic revenues
• 45% will be allocated to health, education, justice, stability and food security
• 27% will be allocated to economic transformation with key focus on textiles, garments and leather industry, agriculture export crops, agri-business, construction, livestock, wood industry, minerals, tourism and ICT and trade and investment facilitation
• 13% will be allocated to rural development
• 10% will be allocated to accountable governance
• 5% will be allocated to increasing productivity and youth Employment gets Frw 106.0 billion (5%)