Breaking down Rwanda’s $3.4bn budget proposal

The Rwandan government is gearing up to spend a substantial $3.4 billion in the current fiscal year of 2020-2021, reflecting an increase from the previous proposed budget of $3.2 billion. This budget allocation is set to prioritize the education and health sectors, which have been greatly impacted by the ongoing COVID-19 pandemic. In a recent interview with CNBC Africa, Angelo Musinguzi, Senior Tax Manager at KPMG Rwanda, shed light on the crucial aspects of Rwanda's updated financial budget. Musinguzi highlighted that over 50% of the budget will be funded through domestic financing, primarily sourced from taxes. This shift towards self-reliance in revenue generation signifies a positive step for Rwanda, reducing reliance on external financing. Musinguzi underlined the significance of improved tax collection mechanisms such as the implementation of electronic billing systems to enhance revenue collection. The Rwandan government anticipates an increase in domestic revenue to around $1.7 billion, despite challenges posed by recent lockdown measures in cities like Kigali. Musinguzi expressed confidence in meeting revenue projections, citing continued consumption and trade activities, even amidst the pandemic. He acknowledged that certain sectors like hospitality and transport have been adversely affected but expressed optimism in revenue reallocation from thriving sectors like services. When addressing the issue of external funding, Musinguzi emphasized the government's focus on ensuring debt sustainability. With a substantial portion of the budget being financed through external sources, including grants and foreign debt, the Finance Minister has reaffirmed Rwanda's commitment to maintaining a sustainable debt to GDP ratio. Musinguzi highlighted the gradual decrease in debt dependency over the years, emphasizing the government's efforts to invest in infrastructure while balancing fiscal prudence. Despite the existing debt challenges, Musinguzi acknowledged the progress made in reducing debt burdens and emphasized the ongoing efforts required to manage fiscal deficits effectively. Rwanda's $3.4 billion budget proposal underscores the government's commitment to prioritizing key sectors like education and health while emphasizing self-sufficiency in revenue generation and strategic debt management practices.