How Rwanda keeps wages, spend­ing low

The East African - - NEWS -

By IVAN R. MUGISHA

RWANDA HAS KEPT ITS wages and salaries below 18 per cent of the bud­get, as part of mea­sures to cut the costs of run­ning gov­ern­ment in­sti­tu­tions.

“Salaries and wages are well con­trolled and rep­re­sent only 18 per cent of the bud­get,” said Uzziel Ndag­i­ji­mana, Min­is­ter of Fi­nance. “They in­creased slightly be­cause of the cre­ation of new in­sti­tu­tions and pro­mo­tion of some staff.”

He said keep­ing re­cur­rent ex­pen­di­ture low is one of the rea­sons Rwanda's debt dis­tress is low. Rwanda has bor­rowed heav­ily in re­cent years to fi­nance in­fra­struc­ture programmes, con­tribut­ing to an in­crease in ex­ter­nal pub­lic debt to 37.5 per cent of GDP in 2017 from 16.4 per cent in 2012.

But its debt sus­tain­abil­ity anal­y­sis in­di­cates low risk of debt dis­tress, ac­cord­ing to the In­ter­na­tional Mon­e­tary Fund. How­ever, the coun­try in­creased its bud­get spend­ing by 7 per cent in the 2017/18 fis­cal year to Rwf2.09 tril­lion ($2.58 bil­lion). Only 17 per cent of this bud­get is funded by donors, while about Rwf362.8 bil­lion is bor­rowed from ex­ter­nal lenders.

A devel­op­ment-cen­tred bud­get has en­abled Rwanda re­alise 26 per cent of the tar­gets stip­u­lated in its Vi­sion 2020. Some of those achieve­ments are in­creas­ing agri­cul­tural pro­duc­tion, re­duc­ing in­fant mor­tal­ity and malaria deaths, and in­creas­ing sec­ondary school tran­si­tional rates.

How­ever, even though its ex­ter­nal debt bur­den re­mains below risk thresh­olds, it is ex­pected to bal­loon in 2023 when the Eurobond is­sued in 2013 ma­tures. Pro­ceeds from the $400 mil­lion Eurobond were in part used to re­pay a debt owed by na­tional car­rier Rwandair, which is still strug­gling to make a profit.

De­spite this, the gov­ern­ment is con­fi­dent that the services Rwandair of­fers to the econ­omy make up for its lack of prof­itabil­ity.

“Ac­tu­ally Rwandair is prof­itable in the eco­nomic sense. What we tar­get is not prof­its from the com­pany it­self but the im­pact it is hav­ing on the econ­omy. Our ex­ports are grow­ing be­cause our con­nec­tion with other coun­tries is ex­pand­ing and tourism is ex­pand­ing. This is the kind of strat­egy we are look­ing at with Rwandair,” Mr Ndag­i­ji­mana said.

Rwanda also has the low­est gov­ern­ment cor­rup­tion level in the re­gion and on the con­ti­nent, a fac­tor that has en­sured that funds meant for devel­op­ment projects are not em­bezzeled.

The coun­try has some of the harsh­est anti-cor­rup­tion laws and reg­u­la­tions in the re­gion, in­clud­ing tap­ping phone line­sof sus­pects, im­pos­ing se­vere fines and pub­li­cis­ing the names and fam­i­lies of peo­ple con­victed of the crime.

Pros­e­cu­tors won 289 cor­rup­tion-re­lated cases be­tween June 2017 and June 2018, up from 121 in 2016, and sev­eral in­di­vid­u­als were jailed.

The Au­di­tor-gen­eral's Re­port for 2017 showed that var­i­ous agen­cies have ghost debtors and cred­i­tors, while their bud­gets have sig­nif­i­cant bal­ances that are omit­ted from fi­nan­cial state­ments.

A to­tal of 16 ac­counts, val­ued at Rwf638 mil­lion ($0.73 mil­lion) were omit­ted from the fi­nan­cial state­ments of six in­sti­tu­tions, in­clud­ing the Rwanda So­cial Se­cu­rity Board, Univer­sity of Rwanda, Rwanda En­ergy Group and four dis­trict hospi­tals.

Pres­i­dent Paul Kagame last Wed­nes­day upped the ante on par­lia­men­tar­i­ans, ask­ing them to bring to book heads of in­sti­tu­tions men­tioned in cor­rup­tion scan­dals in the Au­di­tor-gen­eral's re­port.

Re­gional gov­ern­ments have moved to squeeze ev­ery penny pos­si­ble from their cit­i­zens by in­tro­duc­ing new taxes on con­sumer goods and other essential com­modi­ties to fund their bal­loon­ing bud­gets and to ser­vice devel­op­ment loans.

From kerosene to tooth­paste, toi­let paper, tooth­brushes, sweets, choco­lates, books, mat­tresses and even In­ter­net ac­cess, gov­ern­ments are im­pos­ing taxes, mea­sures that are hurt­ing the poor fur­ther.

This is com­ing at a time when the re­gion's gov­ern­ments are find­ing it in­creas­ingly hard to se­cure ex­ter­nal fund­ing to re­duce their bud­get deficits. The govts have thus re­sorted to painful tax­a­tion mea­sures, even as they in­sti­tute aus­ter­ity in their spend­ing, in the face of missed rev­enue tar­gets.

In June, as fi­nance ministers pre­sented their an­nual bud­gets, East Africa's three top three economies an­nounced plans to bor­row more than $12 bil­lion to fi­nance their bud­get deficits, even as their pub­lic debts rose amid concerns over­sus­tain­abil­ity.

Kenya had the high­est bor­row­ing plans of $5.58 bil­lion, fol­lowed by Tan­za­nia at $4.6 bil­lion and Uganda at $2.4 bil­lion, with a huge chunk of this be­ing sourced from ex­ter­nal fi­nanciers. How­ever, this seems to have slowed down, as the real­ity that they needed to cut down their spend­ing sank in.

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