May 21, 2020

Government Expects Tax Collection to Drop By Nearly 10% Next Year, Debt Repayments UP 28%

media@250 May 21, 2020

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Finance and Economic Planning Minister Dr Uzziel Ndagijimana in Parliament this Thursday morning

For the next financial year 2020-2021, government is planning with the expectations that the taxman wont bring in that much compared to previous years.

In budget estimates presented to the nation this Thursday morning, the Finance and Economic Planning Minister Dr Uzziel Ndagijimana, admitted that the ongoing COVID-19 pandemic is going to eat up a sizable portion of the country’s tax base.

For the coming year July 2020 to June 2021, the Rwanda Revenue Authority (RRA) is projected to collect slightly more than Rwf 1.42 trillion. Compared to the 2019-2020 collections which were over Rwf 1.56 trillion.

There is a drop of Rwf 147.6 billion, which is a 9.4 percent slash in tax collections.

This drop is quite a huge amount of money. The budgetary allocation for agriculture, which employs a vast majority of Rwandans, received just above Rwf 160billion in the outgoing year.

“The decline in the tax revenue collection is due to the current economic situation with the effect(s) of the pandemic COVID-19 [that] started in March,” says the Finance Minister.

The Parliament that the Minister was addressing was completely different from previous years. MPs sat more than a meter apart due to the social distancing rules meant to control spread of the virus. The usually packed chamber, was nearly empty. The fanfare with which the Finance Minister arrives was also abandoned. The gloomy mood inside the house shows hows unprecedented the period is.

The MPs left a chair between them as they sat in the House, to respect the social distancing rules meant to control the spread of the COVID-19 virus

Another trouble spot envisaged by Government is non-tax revenues, that are also going down. These come from areas like reimbursements from peacekeeping operations and fees charged for things like driving licences.

For the outgoing year, Government received Rwf 232.9 billion as non-tax revenue. In the next year, it will drop by Rwf 48.6 billion. Reason?

The Finance Minister explains: “Lower reimbursements trend from the UN for the cost of peace-keeping operations in the fiscal year 2019/20 as well as a decline in visa fees reflecting the recent Cabinet decision to remove entry visa of some group of countries visiting Rwanda, mainly account for the lower projected amount.”

The estimated figure for peacekeeping reimbursements in the fiscal year 2020/21 is FRW 142.9 billion , which is FRW 27.4 billion lower than the figure of FRW 169.3 billion projected in the revised 2019/20.

Rwanda has scrapped visa fees for citizens of the Commonwealth, as well as the African Union and La Francophonie member countries. Together, they make up to 90 countries.

However, even if tax revenue is to go down, government plans to spend more next year than it did in the outgoing year.

The total budget for the next fiscal year 2020/21 is projected at Rwf 3,245.7 billion This is Rwf 228.7 billion (or +7.58%) higher than the previous budget of Rwf 3,017.1 billion.

Another headache for government in the upcoming budget is that money spent on debt servicing will increase. More of the loans we borrowed are maturing. This means, more money, that would otherwise have been put into development, will be put in repaying debt.

For the next year, Government has allocated Rwf 199.9 billion for interest payments on loans both domestic and foreign. This figure is Rwf 44.3 billion higher than the amount of Rwf 155.6 billion spent in the last fiscal year, which is a 28.4% increase.

Now, it is important to note that Rwf 59.3billion of this money will be put into paying foreign debt. It is money that will leave Rwanda.

This buget comes at time when there is a growing global movement calling for all debts of the poorest countries be completely wiped off, or the servicing is removed entirely or that the servicings are suspended for at least two years.

This, say proponents, will free up budget money to remain back in those countries to help them deal with the impact of the Coronavirus pandemic. If the campaign succeeds, Rwanda will get to keep the Rwf 59.3billion. Not much, but could be helpful.

Government says spending estimates for the next year have been “guided” by the COVID-19 pandemic. According to the economic recovery plan from the virus, which The Chronicles has reviewed, government estimates that 60% of the population lost everything during the lockdown

ALSO READ: 60% Rwandans Lose Livelihoods Due to COVID-19 Lockdown, and Need Urgent Help

The Finance Minister Dr Ndagijimana says: “…the 2020/21 FY is the mid-year for [7 year National Strategy for Transformation], it concludes the current Vision 2020 and also ushers in the Country’s long term plan, the Vision 2050 that shapes the path towards the Rwanda we want. Prioritization has been guided by the COVID-19 economic recovery plan and priorities of [President Kagame transformation strategy].

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