Effects of Fiscal Components on Private Investment in Rwanda

Private investment forms an integral pillar in attainment of sustainable growth in the economy. Despite the reforms that Rwanda has taken overtime aimed at attracting private investments the ratio of private investments to GDP though increasing is still as low as below 10 % which does not meet the threshold of sustained rapid economic growth and that which can make the vision 2020 to be realized. The study aims to analyze the effects of fiscal components on private investment in Rwanda. Specifically; to assess the effects of government revenue on private investment in Rwanda, to determine the effects of government spending on private investment in Rwanda and lastly to investigate the effects of government borrowing on private investments in Rwanda. The study adopted quantitative descriptive study design. Time series secondary data was used in this study for a period of 18 years from 2000 to 2017. Data was sourced from BNR, NISR and MINECOFIN. The study adopted the OLS technique in its analysis. Prior to this pre-estimation statistical test were carried out on the data to ascertain the suitability of the data in the analysis. The findings indicated that government debt, government spending and tax revenue had strong positive association with private investment in Rwanda. OLS regression indicates that government spending had negative significant effect while government debt and tax revenue had positive significant effects on private investment. R Squared value was 88.7 % and F Statistics of 178.457. the study recommends more tax reforms and channeling of more borrowings and government expenditure in stimulating private investments. This study will be helpful to the government, the private sector investors both domestic and foreign and donors who may be interested in the influence of fiscal policies on private investments.