The Senate supports a new bill on the management of public finances | The new times

The plenary session of the Senate on Monday, August 8 approved the relevance of the draft organic law on the management of public finances, which aims to introduce changes in emergency budgeting and the management of budgetary risks, among others.

This draft organic law is a revision of the current organic law relating to finances and state property promulgated in September 2013.

According to the government, the bill aims to fill the gaps identified by the analysis of the existing organic law. They are summarized in aspects such as its narrow scope leading to accountability problem and the absence of Boards of Directors for Public Financial Management (PFM) issues in SOEs and specialized bodies.

Other issues include those related to budget management (i.e. emergency revisions); as well as fiscal risks associated with state-owned enterprises (guarantees and loans) and public-private partnerships (PPP).

“This bill [once enacted into law]will help public entities to improve the management of public finances and achieve the results expected of them in the annual action plans,” said Richard Tusabe, Minister of State for the National Treasury at the Ministry of Finance and Planning economy (MINECOFIN), while explaining the relevance of the bill for the Senate.

Main changes proposed by the bill to support PFM reforms

1. Emergency Budget Revisions

To improve budget adjustments, rules on emergency budget revisions are introduced to expedite response to future crisis, including disasters and pandemics such as Covid-19, instead of waiting for ordinary budget revision which is carried out six months after the approval of the financial plan.

Tusabe explained that the emergency budget should be increased from 3% of operating expenditure to 3% of the total central government budget, and from 3% of revenue generated by decentralized administrative entities to 3% of this revenue plus allowance. unconditional. grants such as local grants.

2. Strengthening public finance surveillance

According to the explanatory note to the bill, the scope of the organic law has been expanded to include all public sector entities, and a new budget planning and outlook document will be submitted to Cabinet at an earlier stage in the process. planning and budgeting.

In addition, the content of the budget framework document is expanded to include a report on tax expenditures and a statement of fiscal risks.

Tusabe said the tax expenditure report will include how much tax the government waives mainly to attract investors through tax incentives, and what contribution this has made to the country’s development.

Richard Tusabe, Minister of State for the National Treasury at the Ministry of Finance and Economic Planning, addresses senators during the plenary

sitting on Monday 8 August. Photo: Courtesy.

Regarding the statement on fiscal risks, which considers the risks the country is exposed to and may lead to deviations in its economic forecast, Tusabe told senators that these are many, citing disasters and pandemics such as the current one. Covid-19.

“This decision will provide us with the opportunity to identify the risks the country faces in a broader context, and we will submit the corresponding report to you. [Parliament] in order to get a picture of the risk factors, but also to have the possibility of designing a strategy to combat them,” he observed.

3. Creation of the tax risk committee

In order to strengthen fiscal risk management and improve fiscal transparency, a reference to a fiscal risk committee is included.

In addition, budget documents are expanded to include comprehensive tables on all project financing transactions and public-private partnerships; and summary budgets of all public enterprises and specialized agencies that are not state entities.

Senator Hadidja Murangwa said the tax risk committee is something to be appreciated as it will help assess investments and the incentives the government is offering to investors, especially in terms of tax breaks, before they are granted.

“The government is incurring huge costs here, but the public is not aware of it. This is an opportunity to know the investments that are reported in the country, the companies that come to operate in Rwanda and benefit from tax incentives to facilitate their business, and their efficiency in terms of profits for Rwandans”, a- she declared.

4. Carry-over of allocated funds to the next fiscal year

Still within the framework of the improvement of budgetary regularizations, the carrying forward of appropriations is authorized to ensure the settlement of debts of the past financial year.

Currently, MINECOFIN collected these unused funds from the relevant public entities after the end of a fiscal year on June 30.

However, the thresholds for reallocation between different programs should be reduced (from the current 20% to 10%) in order to strengthen accountability in programme-based budgeting.

This, Tusabe said, is aimed at avoiding instability in the budgeting of given initiatives, and it is also based on the ongoing reforms in line with performance budgeting for effective financial planning.

These are, he said, good practices consistent with the government’s fulfillment of its commitments.

“If the fiscal year ends in June, there is nevertheless a contractor who has provided services to the government [then, but was not yet paid]instead of the government taking the money from the entity it was allocated to, the entity will stay with it so that it is able to make the payment on time,” he said.

Senator Pelagie Uwera welcomed the proposal, saying allowing public entities to carry over unspent funds to the next fiscal year could help them speed up payment of amounts owed to suppliers or contractors.

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