Rwanda’s pre-budget analysis for 2023/2024

Rwanda's Minister of Finance and Economic Planning is gearing up to unveil the budget for the fiscal year 2023-2024, with the government proposing a 6 per cent increase in the budget to Rwf5 trillion. Angelo Musinguzi, Senior Tax Manager at KPMG Rwanda, shed light on the budget proposal during an interview with CNBC Africa. The increase in the budget is primarily driven by domestic financing, bolstered by a robust improvement in tax collection and external borrowing. The government aims to fund the proposed Rwf5 trillion budget for the upcoming financial year through a combination of domestic revenues, taxation, external borrowing, and grants. The allocation of the budget sees 58 per cent earmarked for expenditure, with significant investments planned for key sectors. Notably, the education sector is set to receive a substantial portion to enhance the quality of graduates, improve education infrastructure, and bolster the welfare of teachers and tertiary institutions. Agriculture, being a vital sector in Rwanda's economy, will also receive a considerable allocation to boost productivity by providing inputs like fertilisers and enhancing irrigation on arable land. Additionally, the health sector is slated for improvements in the form of new hospital constructions, medical supplies, and infrastructure upgrades. Despite the importance of climate resilience in agriculture, minimal budgetary allocations have been made towards climate change initiatives. Angelo highlighted the critical need to address climate change to ensure food sustainability, reduce importation costs, and mitigate the impact of inflation on food prices. The manufacturing sector, a key focus area in recent years, continues to face challenges, particularly stemming from disruptions in the international supply chain due to the COVID-19 pandemic. While efforts are being made to bolster SME manufacturing and enhance value addition to boost exports, the sector still struggles to recover fully. The absence of significant allocations for the mining sector further complicates matters due to the reliance on imported raw materials, leading to high inflation rates for manufacturers. Regarding the development and policy lending budget representing 42% of the total budget, the government plans to allocate funds to various infrastructure projects such as road construction, feeder roads, airport development, and educational and healthcare facilities. These capital expenditures aim to support ongoing development initiatives in Rwanda. Taxation is expected to play a crucial role in revenue generation, with the Tax Authority and Ministry of Finance revising tax laws and collection measures. Proposed amendments include tax increases on property, promotion of electronic billing, and taxation of multinational companies operating in Rwanda. The government's focus on enhancing revenue from multinational corporations and implementing digital taxation is poised to boost overall revenue collection. In conclusion, the 6% increment in Rwanda's budget for 2023-2024 reflects the government's commitment to driving economic growth, enhancing key sectors, and ensuring fiscal sustainability. With a strategic focus on education, agriculture, healthcare, and infrastructure development, Rwanda aims to navigate challenges and propel towards a more resilient and prosperous future.