The Rwanda finance minister announced on Thursday, that the country’s economic growth is expected to slow to 2% this year from 9.4% in 2019, hurt by the effects of the COVID-19 pandemic.
Uzziel Ndajigimana said the growth was expect to rebound next year to hit 6.3% and to reach 8% in 2022.
He said the small east African nation plans to increase government spending by 7.5% in the 2020/21 fiscal year to 3.245 trillion Rwandan francs ($3.43 billion).
Rwanda imposed one of Africa’s first total shutdowns on March 22, closing non-essential shops, shuttering schools, suspending public transport and banning all “unnecessary travel” outside the home. In April, The International Monetary Fund gave Rwanda $109.4 million in emergency coronavirus funding.
Donors will fund 15.2 percent of the budget with the rest coming from revenue and debt, Ndagijimana said.
He said Rwanda would borrow from abroad 783.4 billion francs but did not give details.
“Government investments will acquire 306.5 billion including a part allocated to supporting private companies hurt by Covid-19 effects and expansion of RwandAir,” Ndagijimana said, referring to the government-owned airline.
Expected budget rise
The government expenditure is expected to rise in the coming fiscal year (2020/2021) by about Rwf 228 billion. The total expenditure for the year is estimated at over 3.2 trillion.
The decline is a result the COVID 19 pandemic, according to the Minister for Finance, Uzziel Ndagijimana.
“This projected amount for the fiscal year 2020/21 reflects the trend of other macroeconomic variables envisaged in the FY2020/21,” part of the budget framework paper reads.
Rwanda economic strategies
Rwanda’s central bank last month lowered interest rates for the first time in about a year and eased cash reserve requirements for banks to stimulate economic growth the government forecasts will slow to 3.5% this year from an earlier projection of over 10%. Banks have already started restructuring loans for clients to cope with lockdowns that have slowed output.
Earlier this month, the Rwandan Ministry of Finance and Economic Planning announced a series of tax exemptions as part of efforts to support different sectors of the economy to recover from the effects of COVID 19 pandemic.
The Government has said that it plans to spend the biggest share of the 2020/21 budget on activities that will boost the economy as part of a broader plan to respond to the impact of COVID-19.
This was said by Finance and Economic Planning minister Uzziel Ndagijimana while presenting the Budget Framework Paper to Parliament on Thursday, May 21. He said the plan prioritises activities that will accelerate the economy, including agriculture, private sector development and youth employment, transport, and energy.
At least 57.2 per cent of the total budget will go towards job creation and entrepreneurship promotion, Made in Rwanda promotion, as well as development of border facilities, and industrial parks.
Ndagijimana told parliamentarians that export promotion, increasing electricity access, accelerating transport projects, and increasing agricultural productivity, are among the priority areas.