2014: Rwanda prepares for tougher spending controls

m_Rwanda prepares for tougher spending controls

Government says one of the major areas it will put money is providing broadband. For example, public buses like this one in Kigali have free WiFi

Rwanda has informed the International Monetary Fund that it intends to introduce tougher rules on spending as government cuts back on aid dependence.

Government is under pressure to move quickly away from donor money – much of it has been drying away amid tough economic conditions in donor countries. Despite domestic revenues covering 60.2% of the $2.6b 2013 budget, foreign pledges have not been as timely as government would like.

The solution; Kigali says beginning February next year, it will be “rationalizing spending for maximum impact on the economy and population.” In other words the Finance Ministry has gone back to the drawing board to make sure every cent goes to the right place.

The IMF was informed of the development via its team that was in the country in September. The IMF mission was conducting a final review of the Policy Support Instrument (PSI) program that has been operations since 2010. Under this program, government chose not to get IMF cash to spend, but rather the Fund was helping government write projects that would entice financing from private sources.

The current PSI ends in January next year. A second 3-year PSI approved on Monday this week will immediately kick-in running to 2017. The IMF team to Kigali released a statement on Monday saying much of what has been done over past 3 years with government was “satisfactory”.

The team said budget implementation was strong due to better revenue performance and expenditure control. The monetary program was on target and structural reforms advanced broadly as planned, added the group.

GDP growth has been strong and inclusive with poverty and inequality declining in recent years, single digit inflation and domestic revenue collection increased to reach 14.1 percent of GDP in 2012/13.

Rwanda Finance Minister Claver Gatete says all the right mix of policy is in place for “accelerated reduction of poverty and jobs creation paving the way to our Vision 2020 of transforming into a middle income country”.

Financial stability is being strengthened and financial markets deepened. The banking system in Rwanda has recovered from a period of restructuring in 2007 and 2008, leading to profitable, well capitalized and liquid banks.

Financial sector legislation and infrastructure have been modernized, framework for monitoring and mitigating systemic risks has improved and BNR supervision capacity has been strengthened. On top of that non-Performing Loans declined and the number of microfinance institutions and SACCOs fully licensed has increased.

With regards to debt management capacity, Rwanda graduated from a low capacity country to a higher public resource management capacity country and from moderate-risk to low-risk of debt distress.

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Olive Ndaka is the Junior Editor for RwandaEye. An investor and young entrepreneur, she is a quick learner and has contributed many articles for RwandaEye in Kinyarwanda.

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