Angola cuts spending, Rwanda ups

1107

The Angolan government approved a revised budget for 2009 that cuts spending to 2.6 trillion kwanzas ($33.3 billion) in a bid to counter lower oil prices and exports, according to a draft of the budget obtained by Reuters.

Rwanda‘s government will meanwhile raise spending in the tiny central African country by 24 percent in the 2009/10 fiscal year compared to calendar year 2008, to stimulate the economy and safeguard against the global slump.

Angola‘s economy has been heavily hit by the world economic crisis as oil prices, which account for over 90 percent of the southwestern African nation’s income, plunged last year, Reuters reports.

The initial budget for 2009, approved amid record oil prices and exports, was worth 3.1 trillion kwanzas (around $40 billion). Angola rivals Nigeria as Africa‘s biggest oil producer.

Although oil prices have recovered, they are still trading at around half of last year’s high of over $147 per barrel.

Angola, which joined OPEC in 2007, has cut oil exports to around 1.79 million barrels per day (bpd) to try to comply with its output quota.

It pumped an average 1.9 million (bpd) last year.

The government also slashed its benchmark oil price for 2009 to $37 per barrel from $55 per barrel in the previous budget.

Parliament, where the ruling MPLA party holds a two-thirds majority, is expected to vote on the budget in coming days.

The government now expects the economy to grow 6.2 percent in 2009, down from an initial estimate of 11.8 percent. Angola‘s economy has registered double-digit annual growth since the end of an almost three-decade long civil war in 2002.

Lower growth has weighed on the local currency, the kwanza, which has depreciated to 78 per dollar from 75 per dollar.

The country’s budget deficit is expected to rise to 14.7 percent of gross domestic product (GDP) from an initial estimate of 7.7 percent. The government also increased its inflation target for the year to 12.5 percent from 10 percent.

Meanwhile, Rwanda Finance Minister James Musoni has boosted Rwanda`s spending.

“We have raised our budget compared to 2008 by 24 percent so this increase is going to help us inject more money into the economy and act as a stimulus and safeguard,” Musoni told reporters after addressing parliament on Thursday.

Spending will increase to 838 billion francs ($1.47 billion), three percent more than the 812.4 billion francs ($1.42 billion) proposed in the draft budget released in April.

Recurrent expenditures will be 481 billion francs, and development spending 342 billion.

The remainder goes on net lending and arrears payment, according to the budget documents.

Musoni said the government was encouraged by Rwanda‘s strong economic performance in the first quarter of 2008, though he did not give growth figures for that period.

The minister predicted 5-6 percent GDP growth for 2009, compared to 11.2 percent in 2008.

That would still be a healthy growth level, compared to global rates this year, though Rwanda is coming from a low base after the economic devastation of its 1994 genocide.

Domestic revenues for 2009/2010 should hit 368 billion ($645 million), with donor budget support at 41 percent of spending, Musoni told parliament.

A budget deficit of 68 billion francs ($119 million) will be plugged by loans, including from Arab and Asian nations, Musoni said.

Musoni said the government will focus on improving infrastructure and food security in the hilly, coffee-growing country.

“Generally the budget is an expansionary one, we want to inject more liquidity into the system, give more people employment, create more income for the people and then safeguard against the effects of global financial crisis,” he said.

Musoni said the global slowdown had caused “uncertainties” for Rwanda‘s exports such as coffee, tea and minerals, and the government was poised to borrow from the IMF if the balance of payments deteriorated any further.

“Our economy, relative to our (African) peers, is going to perform relatively well,” he said.



To counter a liquidity problem which hit earlier in the year, the government has negotiated credit lines for long-term loans from the African Development Bank, European Union Investment Bank and International Finance Corporation, he said.