Contribution of Domestic Revenues on the Reduction of Foreign Aid Reliance in Rwanda

Abstract

The purpose of this research was to assess the contribution of domestic revenue in reduction of foreign aid dependency. It was carried out in Ministry of Finance as the case study with the following objectives: to identify the ways of improving domestic revenues in Rwanda, to examine the factors that contributes to the reduction of foreign Aid reliance and to find different way through which domestic revenues contribute to reduction in foreign Aid reliance. The researcher reviewed literature related to foreign aid dependency, domestic revenues and the contribution of domestic revenue to the reduction of foreign Aid dependency. The researcher further reviewed literature related to foreign aid dependency in Rwanda. The research design used was descriptive and correlational whereas the population was 166 employees of ministry of finance while the sample size was 117. The methods used to selected respondents included simple random and purposive sampling techniques. The tools used to collect data were questionnaires and interviews for primary data and documentary review for secondary data. With the help of SPSS, tables and figures were used to present data while frequencies and percentages were used to analyze and interpret the findings. The researcher found out that in order to improve domestic revenues government investment must be encouraged at a reasonable rate because it contributes to other sources of revenues like license and domestic taxes examples taxes from employees working in these investments, this meant that domestic revenues in Rwanda are sufficient of running the national budget and contribution to Domestic revenues must sufficient enough in long to reduce the reliance in Rwanda. The researcher concluded that the ways of improving domestic revenues in Rwanda are domestic taxes, licenses, government investment, Agaciro Development Fund, fees and fines. The domestic revenues collected in Rwanda are sufficient to support the budget but not purely enough to reduce foreign aid reliance in Rwanda. Based on the findings i have a dream that one day current dependent Countries, and more especially in Africa, will be dependable ones. However, this dream will only come true if these countries exhaust their natural resources not only effectively but efficiently while using them to favour the general public not an individual or a specific group of people. Hence, Africa will get rid of reliance on foreign aid. The masses in Rwanda need to be sensitized about the dangers of foreign aid reliance in Rwanda. The researcher recommended that more sources of domestic revenues should be solicited so as to increase revenues and reduce foreign aid dependency and that various sources of revenue that do not strain citizens like increasing the tax base with minimal tax burden should be introduced.