Rwanda - Public expenditure program : an instrument of economic strategy

Report No. 7717-RW Rwanda Public Expenditure Program An Instrument of Economic Strategy (In Two Voumes) Volhme I October 19,1989 South Central and Indian Ocean Department Africa Region FOR OFFICIAL USE ONLY -, Documnt of Ohe World Bank This document has a restricted distribution and may be used by recipients only in the perfornance of their official duties. Its contents may not otherwise be disclosed witout World Bank auth_rization. e  CURR ngDT From January 1974 through August 1983 the Rwnda Franc (Rwf) was pogged to the US dollar at a rate of exchange of US$1.00 - RwF 92.84. Since September 1983 the Rwanda Franc has been pegged to the SDR at a rate of exchange of SDR 1.00 - RwF 102.71. (Aunual Average) Year US $1 - 1982 RwF 92.84 1983 RwF 94.34 1984 RwF 100.17 1985 RwF 101.26 1986 RwF 87.64 1987 RwF 79.67 1988 RwF 76.45 1989 (July) RwF 80.77 fIfAL TM January 1 ^ December 31 HITRIC sts  FOR OFFCIUL USE ONLY PREFACE This first public expenditure review on Rwanda is based on the findings of a mission that visited Rwanda in November 1988. The members of the mission meres Zeynep Taymas (mission chief, task manager), Whitney Foster (country officer, external aid), Mao Sin (economist, PIP), Swati Ohosh (economist, recent economic developments), Iradj Alikhani (industrial economist, manufacturing sector), Moncef Guen (consultant, institutional issues), Bonaventure Mbida-Essama (consultant, agricultural sector), Peter Ngomba (consultant, education sector), and Donald Shepard (consultant, health sector). This report has also benefitted from the cumulative knowledge and contributions of the following Bank sectoral experts who work on Rwanda: Girard Tenaille (water supply), Orville Grimes (urban sector), Bengt Bostrom (transport sector), Kathleen Mikitin (energy sector), Ngozi Okonjo-Iweala (agricultural sector), and Tskamasa Akiyama (coffee subse tor). Martha de Melo acted as external adviser. An earlier draft of this report was discussed with the Rwandese authorities in July 1989. This document has a festricted distribution and may be used bj recipients onty in the perfofmance of their offcial duties Its contents may not otherwise be disclosd without World Bank autho0lution.  RWANDAs PUBLIC EXPENDITURE. AN INSTRUMENT OF ECONOMIC STRATEGY TABLE OF CONTENTS Paie No. ABBREVIATIONS AND ACRONYMS LIST OF TEXT TABLES LIST OF CHARTS EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . INTRODUCTION. . . . . . . . . . . . . . . . . . . . 1 I. ECONOMIC DEVELOPMENTS IN PERSPECTIVE. . . . . . . . 3 A. THE NATIONAL SCENE. . . . . . . . . . . . . . . 3 B. RESOURCE MOBILIZATION . . . . . . . . . . . . . 5 II. PUBLIC EXPENDITURE (1982-87). . . . . . . . . . . . 11 A. PUBLIC INVESTMENT . . . . . . . . . . . . ... 11 B* CURRENT EXPENDITURE . . . . . . . . . . . . . . 13 III. A CHANGE IN ECONOMIC STRATEGY . . . . . . . . . . 18 A. CONSTRAINTS AND PROSPECTS . . . . . . . . . . . 18 B. ALTERNATIVE SCENARIOS . . . . . . . . . . ... 19 (a) Policy Refoms. . . . . . . . . 20 (b) The Scenarios . . . ............ 22 (c) The Results......... 23 IV. SECTORAL PROGRAM AND EXPENDITURES . . . . . . . . . 28 A. THE SETTING OF A PROGRAM. . . . . . . . . . . . 28 B. AGRICULTURl. . . . * . . . . . . . . . . . . 30 C. MANUFACTURING AND MINING. . . . . . . . . . . . 32 D. ENERGY. . . . . . . . . . . . . . . . . . . . . 33 Eo TRANSPORT . . ... . . . . . * . . 35 F. URBAN SECTOR. . . . . . . . . . . . . . . . . , 37  G. WATER AND SANITATION. . . . . . . . . . . . . . 37 H.* HEALTH* .. .. . . . . . . . . 38 I* EDUCATION . ....... ... ........ 40 V. A PUBLIC EXPENDITURE PROGRAM. 1990-1992 . . . . . . 44 A. PUBLIC INVESTENT PROGRAM . . . . . . . . . . 44 Bo CURRENT EXPENDITURE . . . . . . . . . . . . . . 46 VI. TOWARDS MULTIANNUAL EXPENDITURE PROGRAMMING . . . . 50 A* ANNUAL BUDGETING. . . . . . . . . . . . . . .o. 50 (a) The Accounts. . . . . . . . . . . . . . . . 50 (b) Budget Preparation. . ......... 51 (c) Budget Execution. . . . . . . . . . . . . . 52 B. FIVE-YEAR PLANNING. . . . . . . . . . . . . . . 54 C. MULTI-YEAR PROGRAM NING. . ............. ...a..a 55 (a) Project Programing ..... . . . ....... 55 (b) Aid Coordination. . . . . . . . . . . . . . 56 ANNEX I -NOTE ON THE FLOW OF FU DS.............. 58 STATISTICAL APPENDIX. . . . . . . . . . . . . . . . . . . . . . 80  ABBREVIATIONS AND ACRONYMS BNR Ba que i tionale du Rwa- d BUNEP Bureau national d'etudes et de planificacion CERAI Centre d'enseignement rural et artisanal integre CIC Comite Snterministeriel de coordination DB Budget de daveloppement EEC European Economic Community FED Fonds europeen de developpement FOF Flow of Funds GDW General Directorate of Water ICOR Incremental Capital-Output Ratio IRD Integrated Rural Development ISAR Institute of Agric4ltural Research LABOPHAR Laboratoire pharmaceuti9ue du Rwanda MINAFFET Ministere des affaires etrangeres et de la cooperation MINAGRI Ministere de l'agriculture, des forts et de l'elevage MINIFIN Ministare des finances MINIMART Ministare de l'industrie, des mines et de l'artisanat MININTER Ministere de 1'interieur et du developpement communal MINIPLAN Ministere du Plan MINIPRISEC Ministare de l'enseignement primaire et secondaire MINISUPRES Ministare de l'enseignement superieur et des ressources scientifiques MINITRANSCO Ministere des transports et communications MINITRAPE Miaist're des travaux publics et de lVinergie NINSANTE Ministere de la sante NCTA Northern Corridor Transit Agreement OB Budget ordinaire ONATRACOM Office national des transports en commun OVAPAM Office de la valorisation pastorale et agricole du Hutara OVIBAR Office de valorisation industrielle des bananeraies du Rwanda PEP Public Expenditure Program PIP Public Investment Program STIR Societe des transports internationaux du Rwinda TRC Tanzania Railways Corporation UNCTAD United Nations Conference for Trade and Development UNDP United Na_.ions Development Programme UR Uganda Railways  LIST OF TEXT TABLES Table No. Page No. Chapter I 1-1 Domestic Resources and Uses, 1982-88.** .... 5 1-2 Government Account, 1982-88................. 6 1-3 Origin of Government Resources, 1982-88....... 7 1-4 Banking System Contribution to Government, Net, 1982-8815 trlFai C.rb.. to Go .s-ve ** 8 1-5 External Financial Contribution to Government, Net, 1982-88 ........ 0...... ....... 0 9 1-6 Private Financial Contribution to GovernAment, Net, 1982-88 ................ 10 Chapter II 2-1 Public Investment under the Third Plan, 1982-86. 12 2-2 Current Expenditure, Economic Classification, 1982-88.*.* ......... .... o*****