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National Budget Brief · PDF file over half of national budget financing (53 per cent), followed by external borrowing (17 per cent), and external grants (14 per cent). • Although

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    Rwanda

    National Budget Brief Investing in children in Rwanda

    2019/2020

  • National Budget Brief: Investing in children in Rwanda 2019/2020

    © United Nations Children’s Fund (UNICEF) Rwanda December 2019

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    Preface

    This national budget brief explores the extent to which the

    Government of Rwanda’s budget addresses the needs of

    children under 18 years of age through the national budget.

    The brief analyses the macro-economic situation as well as

    the size and composition of budget allocations to priority

    sectors for children; health (including nutrition), education,

    social protection, and water and sanitation for the fiscal year

    2019/2020. The budget brief aims to synthesize complex macro-

    economic and public budget information with a bearing on

    the implementation of children’s rights in Rwanda, as well

    as offering recommendations on how the government can

    improve investments in children.

    Key highlights

    • Rwanda continues to make significant progress in socio-economic and inclusive development, which is essential for improving the well-being of children. The projected growth rate of 8.5 per cent in 2019 is therefore an opportunity to strengthen domestic revenue mobilization to support more investments in children.

    • For 2019/20, the total National budget amounts to FRW 2,876.9 billion up from FRW 2,585.1 billion of the revised budget of 2018/19. This reflects an increase of 11.3 per cent. The national budget allocations are aligned with the National Strategy for Transformation’s strategic ambition to fulfil the objectives of Vision 2020 while transitioning towards Vision 2050.

    • Social sector budget allocations have increased by 4.7 per cent compared to 2018/19, whilst overall the national budget grew by 11.3 per cent. In the future, there is need to align the changes of sector spending with the overall changes in sources of budget revenue and expenditures.

    • The share of domestic resources in the budget has been expanding over the past years but further interventions are required to compensate for decreasing donor support. In 2019/20 tax revenue account for slightly over half of national budget financing (53 per cent), followed by external borrowing (17 per cent), and external grants (14 per cent).

    • Although the overall budget execution rate is very high (101.9 per cent), budget execution within the social sectors is low. In 2018/19 the execution rate was 80.4 per cent for Water and Sanitation, 70.9 per cent for Health and, 58.6 per cent for social protection, which requires further government involvement to ensure high budget execution among social sectors.

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    1. Introduction

    1.1. Rwanda macro-economic performance

    Rwanda continues to make significant progress to spur economic growth. For the past four years, GDP growth rate has remained robust. In the second quarter of 2019, Rwanda’s growth rate was 12.2 per cent as a share of GDP, up from 8.6 per cent during the first quarter, providing high optimism of achieving the 8.5 per cent projected annual economic growth by 2019.

    GDP per capita in Rwanda has increased from US$ 735 in 2015 to US$ 898 in 2019 as projected (Figure 1). Despite a slowdown in 2016-2017 caused by external shocks, Rwanda has maintained sound macroeconomic performance attributed to several policy reforms ranging from trade, facilitating doing business and increased public investments.

    Figure 1: Economic performance

    0 1 2 3 4 5 6 7 8 9

    10

    0 100 200 300 400 500 600 700 800 900

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    2015 2016 2017

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    GDP per Capita (US$) (left axis)

    2018 2019 (proj)

    GDP Growth rate (%) (left axis)

    Source: MINECOFIN Macroeconomic Framework data

    Rwanda’s inflation level is low. In 2018, it was 1.4 per cent down from 4.9 per cent in 2017 (Figure 2). The low level of inflation is due to good performance of the agriculture sector and declining prices of export commodities at the international

    level.

    Figure 2: Inflation trends

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    2015 2016 2017 2018 2019 (proj)

    Source: MINECOFIN Macroeconomic Framework data

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    1.2. Economic sectors’ contribution to GDP in the medium term

    Over the medium term, the country’s economy will continue

    to be driven by the agriculture, services and industrial sectors.

    While the growth of the services sector is projected to average

    8.2 per cent between 2018-2020, the agriculture sector growth

    will average at 5.6 per cent, particularly in food and export

    crops, due to continued investments to improve seeds and

    extend small-scale farming. The industrial sector will play a

    more important role by contributing more than 10 per cent to

    GDP growth in the medium term. The industry sector growth

    will be further enhanced by the Government of Rwanda’s

    efforts to promote locally-produced goods under the “Made in

    Rwanda” programme.

    Table 1: Sectoral growth and near future economic projections

    2016 2017 2018 2019 2020

    GDP Growth rate 6.0% 6.1% 8.6% 7.8% 8.0%

    AGRICULTURE 4.0% 7.0% 6.0% 4.5% 4.3%

    Food crops 3.0% 7.0% 4.0% 5.1% 5.1%

    INDUSTRY 7.0% 4.0% 10.0% 13.1% 13.9%

    Mining & quarrying 10.0% 21.0% 20.1% 31.5% 32.9%

    Manufacturing 7.0% 6.0% 6.1% 7.6% 8.5%

    Construction 5.0% -3.0% 5.2% 10.1% 8.7%

    SERVICES 7.0% 8.0% 9.0% 7.8% 7.8%

    Source: MINECOFIN 2018/19 -2020/21 and NISR- GDP Accounts

    1.3. Employment and Labour Market

    The Government of Rwanda is committed to supporting

    the creation of more than 214,000 decent and productive

    jobs annually to deal with rising youth unemployment. A

    comparison between the 2018 Labour Force Survey (LFS) and

    Q2-2019 LFS findings shows that the working age population

    (of 16 years and above) has increased from 7.0 million to 7.1

    million, or 1.5 per cent. However, the population who reported

    to be out of the labour force has increased by 4.7 per cent

    during the same period, mainly because of a 4 per cent

    increase in the student population and 8 per cent increase of

    discouraged job seekers. Moreover, the unemployment rate

    has increased from 14 per cent in 2018 to 15 per cent in 2019

    (Q2), and this rate excludes the people involved in subsistence

    agriculture. The subsistence agriculture sector accounts for

    52.4 per cent of all the labour force.

    The youth (16 - 30 years old) constitutes 43 per cent of the

    labour force (2019). Additionally, the share of young people

    (16 to 24 years old) neither in employment nor in education or

    training (NEET) declined to 30.8 per cent in 2019 (Q2), down

    from 33.9 per cent in 2018.

    1.4. Monetary sector and external sector development

    For the first half of 2019, the National Bank of Rwanda (NBR)

    maintained an accommodative monetary policy stance.

    The aim was to expand the overall money supply to boost

    economic growth and support the banking sector. The lending

    rate was further reduced from 5.5 per cent in June 2017 to

    5 per cent in 2019. The external trade deficit has continued to

    widen from US$ 601.4 million in 2018 to US$ 767.9 million in

    2019, reflecting an increase of 27.6 per cent. This is due to an

    increased demand for capital goods for ongoing infrastructure

    projects. The Rwandan Franc depreciated by 2.2 per cent

    against the US Dollar by the end of June 2019. Exchange rate

    pressure originated from the increased difference between

    imports and exports.

    1.5. Child Poverty: Multidimensional deprivation: 4-15 Years old

    Conducted for the first time by the National Institute of

    Statistics of Rwanda (NISR) in 2016/17, a multiple overlapping

    deprivation analysis (MODA) explores different deprivations

    that are most commonly experienced simultaneously (the

    overlap of deprivations) among children following a lifecycle

    approach. The fifth Integrated Household Living Conditions

    Survey (EICV5) thematic report on the multidimensional

    poverty of children follows the UNICEF MODA methodology

    and combines several dimensions of deprivation by different

    age groups of children; (i) health, (ii) education, (iii) water,

    (iv) sanitation, (v) and housing. Among the children between

    five and 14 years of age, the highest deprivation identified

    was access to decent housing with 60.4 per cent of this group

    affected, followed by 52.2 per cent of children with deprived

    access to water, and 44 per cent deprived from access to health

    services. The least deprived dimension among children is

    access to education with 6.3 per cent (Figure 3). A combination

    of different dimensions of deprivations shows 25 per cent