5/8/2012 Presentation Outline I. Medium Term Fiscal Strategy II. 2012/13 Budget Framework III. Sectoral Resource Allocation IV. Key Policy Issues V. Conclusion 1 1
5/8/2012 Medium Term Fiscal Strategy 2 Medium Term Fiscal Strategy The medium term fiscal strategy of the Government is to deepen fiscal consolidation to close the fiscal gap. Domestic revenue is projected to grow by 0.3% of GDP D ti i j t d t b 0 3% f GDP annually rising from 14% of GDP in 2012/13 to 14.9% of GDP by 2015/16. External grants are projected to decline as a share of GDP with budget support grants dropping from 11.4% of GDP in 2012/13 to 7.2% by 2015/16. Total loans are projected to increase from 0.2% of GDP in 2012/13 to 0.6% of GDP in 2014/15. However, the rise in total loans will not fully compensate for the decline in external grants. 3 2
5/8/2012 Medium Term Fiscal Strategy Total expenditures and net lending are projected to increase to 28% of GDP in 2012/13 but decrease gradually to 24.5% of GDP in 2014/15. The overall fiscal balance including grants has been allowed to grow by about 0.7% of GDP in 2012/13 to accommodate increase in the wage bill and domestic capital. The overall fiscal balance is however projected to gradually decline to 2 3% of GDP by 2014/15 gradually decline to 2.3% of GDP by 2014/15. The net domestic financing at a healthy level of 0.3% of GDP in 2012/13 will be safeguarded even in the medium term. 4 Medium Term Fiscal Strategy 5 3
5/8/2012 2012/13 Budget Framework 6 The 2012/13 Budget Framework The 2012/13 budget has been formulated with the following objectives in mind: Increase domestic revenue mobilization Allocate resources for the implementation of the Pay and Allocate resources for the implementation of the Pay and Retention Policy Create efficiency savings without compromising service delivery and allocate resources to some priority programs Broaden the coverage of projects grants in fiscal operations Total Revenue and Grants are projected to rise to 25.4% of GDP in 2012/13 compared to 25.1% in revised 2011/12. p Total Expenditure and Net Lending are estimated at 28% of GDP compared to 26.9% in the 2011/12 revised budget. The overall fiscal deficit is estimated at 2.6% of GDP in 2012/13 compared to the 1.9% in the revised 2011/12. 7 4
5/8/2012 2012/13 Budget Framework 8 The 2012/13 Budget Framework The tax revenue projections do not envisage significant changes to the tax regime except for the SME tax schedule. The current tax regime for small enterprises is a flat tax rate of 4% The current tax regime for small enterprises is a flat tax rate of 4% on turnover if no books of accounts are kept. The change of this regime has been motivated by the following factors: Lower both compliance and administrative costs Reduce uncertainties faced by taxpayers Improve the level of voluntary compliance It is proposed to classify SMEs into two groups on the basis of turnover with the following tax rates: i h h f ll i Turnover of between RwF 12 Mn and RwF 50 Mn to pay a presumptive tax at 3% instead of 4%. Classify SMEs with a turnover of RwF 12 Mn and below into 4 bands with specified presumptive rates. The change of tax regime for SMEs is envisaged to be revenue neutral. 9 5
5/8/2012 The 2012/13 Budget Framework The non tax revenue projections for 2012/13 is RwF 7.6 billion lower than the 2011/12 revised estimate mainly due to one ‐ off receipts from Airtel license fees. Administrative fees continue to contribute the largest share of non tax revenues with travel documents, migration visas, driving license and ID cards being key revenue items in 2012/13. The total grants for 2012/13 is 0.1% of GDP higher than the 2011/12 budget but budget support grants are lower 0.6% of GDP lower than that of the 2011/12 revised budget . Total capital grants are projected to increase by 1.5% of GDP in 2012/13 as compared to 2011/12 on account of global funds and increased coverage of capital projects on budget. External project loans are projected to increase by 0.9% of GDP in 2012/13 compared to the 2011/12 revised budget. 10 The 2012/13 Budget Framework Recurrent expenditures are projected to decline as a share of GDP from 14.5% in 2011/12 to 14.1% in 2012/13 but the absolute amount increases. The main reasons for the decline in recurrent expenditures for 2012/13 compared to 2011/12 are: Reclassification of Districts projects financed by Central Government under Development budget in 2012/13 compared to 2011/12. Creating efficiency savings from some inefficient items Creating efficienc sa ings from some inefficient items under goods and services. Reduced allocation to exceptional expenditures as most FARG beneficiaries are mainstreamed into other social programmes. 11 6
5/8/2012 The 2012/13 Budget Framework The allocation to development budget is 1.3% of GDP higher than the 2011/12 revised budget estimate. The main reasons for the increase in development budget Th i f th i i d l t b d t in 2012/13 include: Broadening the coverage of externally financed projects captured on budget. Deliberate action to allocate resources to strategic and priority projects. Reclassification of Districts projects financed by Central Government under Development budget in 2012/13 compared to 2011/12. 12 RLDSF Projects under Districts Budgets The RLDSF projects supported by DPs will for the 2012/13 budget be provided under districts budgets: Development partners will continue to transfer their contribution to the RLDSF account in accordance with t ib ti t th RLDSF t i d ith the agreed disbursement schedule and conditions. RLDSF will be responsible to disburse funds to districts and monitor the way these funds are put to use. Districts shall be responsible for implementing the projects and reporting as required. MINECOFIN will provide the technical support for spending through the SmartIFMS. 13 7
5/8/2012 The 2012/13 Budget Framework The gross spending under net lending in 2012/13 is estimated at RwF 22.0 bn. However net expenditure will fall to RwF 9.8 bn due to accrual of privatization receipts. The 2012/13 overall budget deficit is 2.8% of GDP and grows by 0.7% of GDP compared to the 2011/12 revised budget. About 89% of the overall deficit (2.5% of GDP) will be financed by net inflows of foreign loans. About 11% of the overall budget deficit (0 3% of GDP) will be About 11% of the overall budget deficit (0.3% of GDP) will be financed through domestic borrowing. The total domestic debt stock will only increase marginally to RwF 188.1 bn compared to RwF 175.4 bn estimate in the 2011/12 revised budget. 14 Sectoral Resource Allocation 15 8
5/8/2012 Sectoral Resource Allocation The estimated investment for EDPRS implementation was RwF3,436 billion and by end of 2012/13 financial year, the total cost of implementing EDPRS will be RwF 5,129.4 Bn, 49.3% above the projected cost. The final year of implementing EDPRS 2012/13 will focus completing EDPRS priorities in progress while targeting resources to critical areas highlighted in the recent EICV report such as: Infrastructure development especially energy generation. Creating off ‐ farm employment targeting SMEs development. Promoting urbanization as integral part of development. g g p p Maximizing tourism and mining potentials. Scaling up market access by increasing investment in feeder roads. Targeting social protection interventions. 16 Sectoral Resource Allocation At the time of preparing EDPRS in 2007, the total budget was RwF 493.3 bn. Estimates for EDPRS investment were estimated on an average of about 12% annual growth in budget. However, growth in the budget for subsequent years far exceeded the projections for different reasons. 17 9
5/8/2012 Sectoral Resource Allocation The infrastructure sectors at RwF 1,173 billion have benefited 73% above the estimated share of the total budget and are at 22.9% share as compared to the target of 19.7%. The increased investment in Infrastructure was allowed by the fiscal space created under Human Development and Social Sectors as well as space created under Human Development and Social Sectors as well as in the productive sectors. The total investment in productive sectors exceed the projected investment by 27% but falls short of the projected share of 16.7% by a mark of 2.5%. The overall performance of indicators in the productive sectors remain on or above target. The total investment in HD & Social sectors exceed the projected investment The total investment in HD & Social sectors exceed the projected investment by 35.8% but falls short of the projected share of 34.2% by a mark of 3.1%. Like productive sectors, performance indicators are on track. The total investment in the Governance and Sovereignty Cluster exceed the projected investment by 61.7% and at 31.8% share of the total budget, the cluster is above the estimated share by 2.4% 18 Resource Allocation ‐ Infrastructure 19 10
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