There’s optimism that Rwanda’s economy will rebound to a strong growth rate this years, Uzziel Ndagijimana, the Minister for Finance and Economic planning told parliament as he presented the national budget for the fiscal year 2021/22
Due to Covid-19 pandemic, the economy witnessed a 3.4 per cent recession in 2020 compared to a 9.5 per cent growth in 2019.
However, government economic recovery strategies, which included stimulus packages for the most hit businesses helped the economy to grow by 3.5 per cent in the first quarter of 2021.
Now the government is optimistic that public spending which is set to increase by 9.8 per cent in the coming fiscal year will propel economic growth to 5.1 per cent.
Under the budget for the 2021/22 fiscal year, the government plans to spend Rwf3,807 billion, up from Rwf3,464.8 billion in the 2020/21 fiscal year.
“Despite worries over the pandemic that continues to ravage the world and our country, it is expected that our economy will grow by 5.1 per cent in 2021,” Ndagijimana told both chambers of parliament during a virtual presentation of the budget.
He disclosed that going forward, the economy is expected to grow by 7 per cent in 2022 and 7.8 per cent in 2023 before rebounding to the Covid-19 pre-Covid-19 growth rates in 2014.
The 2021/22 budget is themed “Economic Recovery through industrialization and inclusive growth”
MP Gloriose Uwanyirigira requested the minister to explain clear strategies that will deliver the projected growth yet the Covid-19 pandemic continues to ravage the world.
“How will the projected growth be attained yet the pandemic which caused problems is worsening?” she wondered.
She also wondered how a big percentage of the budget will be domestically financed yet the virus continues to take its toll on the economy.
Taxes to fund the budget, she said, had been severely affected by the pandemic.
Ndagijimana said that the economic recovery fund and the Covid-19 vaccination drive are among the major tools to help drive growth.
“We are optimistic about the projected growth will be attained because a big part of the budget will be spent on economic recovery programmes to support the private sector particularly businesses and development projects affected by Covid-19,” the Minister said.
Sustained vaccination against Covid-19, he added, will reduce the Covid-19 transmission and prevent the disruption of economic activity by avoiding lockdowns.
The Minister added that the agricultural sector is projected to grow by 5.7 per cent on account of 5 per cent in food crop production as well as a 12 per cent increase agricultural exports.
In 2020, agricultural production increased by just 1 per cent due to heavy rains and floods.
Industrial production, the Minister said, is expected to grow by 7.9 per cent fuelled by the mining sector where production is projected to grow by 11 per cent as well as the construction sector, which is to grow by 11.6 per cent.
In 2020, the construction sector decreased by 6 per cent.
The services industry, arguably the worst hit by Covid-19, is expected to grow by 3.9 per cent.
Due to the Covid-19 restrictions, various meetings, incentives, conferencing and exhibitions were suspected.
These were increasingly becoming key drivers to tourism revenues.
Last year, the services industry decreased by 6 per cent last year.
Under the 2021/22 fiscal year, growth in export revenue is expected to outpace imports.
Export revenues are projected to increase by 22.6 per cent while imports will grow by 14.3 per cent, propelled by importation of construction and manufacturing materials, Ndagijimana said in his budget speech.
Threats to the economy
Ndagijimana said the implementation of economic policy could face both international and domestic challenges.
The challenges to the economy include climate change effects that could affect agricultural productivity and effects posed by Covid-19 on the economy.
“Challenges from outside the country include falling international prices due to Covid-19 on the global economy, especially in developed and emerging countries where we export our commodities. Government will continue to monitor any changes to come up with appropriate measures,” he said.