How Rwanda keeps wages, spending low
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.