Budget: Energy to top Rwangombwa’s priorities
As finance minister John Rwangombwa heads to Parliament on Thursday to present the national budget proposals for 2012/2013 financial year, the question most people are asking is: which sectors will get a bigger slice of the cake?
Initial signs point to energy and other poverty reduction interventions.
For starters, the 2012/13 fiscal year is the last year for implementation of the second phase of Economic Development and Poverty Reduction Strategy (EDPRSII). This gives some indication where national priorities are.
Indeed, the minister said as much during the presentation of the budget framework and estimates for 2012/13 before a joint session of the Senate and the Chamber of Deputies three weeks ago.
With poverty levels falling from 56.9% in 2006, to 44.9% in 2011 following implementation of EDPRS I, Rwangobwa revealed that the next budget would allocate a great part of funding to areas that still need to be strengthened to in order to achieve national priorities.
They include energy, transport development, farming, industrial and private sector development, health, education, governance and security.
“Poverty has reduced by 12%, moving from 57 percent in 2006 to 45% in 2011. This outpaced our target of 46% at end of 2012,” said Rwangombwa.
It is expected that in order to consolidate these achievements, the budget will focus on areas that ensure just that.
Key ministries will include trade and commerce as it directly works with the business community. With SME’s accounting for 98% of the business community in Rwanda, it would look like the ministry’s proposed budget of Frw 18 billion for the coming fiscal year will be inadequate.
However, François Kanimba, the minister of trade and commerce, last week told Parliament that the ministry intends to allocate 26% of its budget to SMEs.
This will be a good move considering that most SMEs, especially those in the agro-processing sector, say that limited access to funding is retarding their growth.
If approved, MINICOM’s proposal would benefit 40 best business plans in every district translating to 1,200 projects by the end of 2012/2013 fiscal year.
According to the budget framework, infrastructure – mainly energy and transport development will get Frw 361.2 billion or 23% of the entire budget. This is a good allocation considering that the country’s investment portfolio both by foreign and local investors is expected to top $800 million by the end of 2012.
Investors will need good roads to ease transportation and market linkages both internally and regionally while constant supply of power will be vital for sustained production.
Last week, experts at the African solutions to African problems platform agreed that while Africa had its natural wealth, economies should wakeup to the need of addressing the current infrastructure gap estimated at $93 billion annually.
Being a land locked country; investing in transport and energy is necessary to increase Rwanda’s competitiveness in the region.
At Frw 450.7 billion or 32.7% allocation of the entire budget, Health and education will take the biggest share as key elements of the social sector.
Education looks poised to take more because the ministry has up to now failed to recruit 4,000 school-based mentors needed to teach English because of lack of money. Primary teachers’ salaries were also tipped to be raised this term.
Last year, Rwangombwa said that the next financial year will see education budget increased by Frw 59 billion so as to cater for such long awaited needs and to cover 2,000 teachers expected to join the profession 2012.
“This will be based on qualification and experience in the teachers’ profession,” Rwangombwa said.
The total budget for the next financial year, Rwangombwa recons will be Frw 1,374.4 billion—about 15% up from 2011/12. At least 52% of it will financed by domestic revenues, leaving donor-funding to account for 48%.
The minister is likely to announce new taxes or increase existing ones as the only way to meet the country’s budget obligation. Alcoholic products might be a target for obvious reasons that taxes never seem to stop addicts.