By RODRIQUE NGOWI, Associated Press Writer

KIGALI, Rwanda - Rwanda's next budget will seek to finance demobilization of troops withdrawn from neighboring Congo, a national referendum on a new constitution and the first presidential and parliamentary elections since the 1994 genocide, the finance minister said Tuesday.

The budget, to be read in parliament on Nov. 27, targets 7 percent growth, revenue collection equaling 12.5 percent of its US$1.8 billion GDP (news - web sites) and a 9 percent deficit, while maintaining inflation at 3.2 percent, Donald Kaberuka said.

Next year will be "a watershed" Rwanda, Kaberuka said. "It is the end of the transition (to democracy) and the budget reflects that."

In a bid to stimulate growth and expand the tax base, the budget will reduce taxation on businesses, freeze value added tax at the current 17 percent and slash by 90 percent tariffs on goods from the Common Market for Eastern and Southern Africa, or COMESA, Kaberuka said.

In a move to tackle the 30-40 percent bad debts saddling the banking sector, the budget will provide Rwandan francs 5 billion (US$10 million) to finance the restructuring of the country's biggest bank, the Commecial Bank of Rwanda, before the government sell its 51-percent stake next year, Kaberuka said.

Privatization will press ahead, with the government selling its 51- percent share in the telecommunication company, Rwandatel, and placing Electrogaz the power, water and gas supply company under private management to improve its performance before it is offered as a concession five years later, Kaberuka said.

The pilot phase of privatization of the tea industry the leading foreign currency earner will begin with the sale of the two largest tea estates, Mulindi and Pfunda, Kaberuka said.

Despite the withdrawal of some 20,000 troops from Congo after a four-year civil war, the budget will not see a dramatic reduction in defense spending because Rwandan rebels based the neighboring country are not disarmed to guarantee peace in the region, Kaberuka said.

Rwanda and Uganda sent troops to neighboring Congo in 1998 to back Congolese rebels seeking to oust then-President Laurent Kabila, accusing him of arming rebels threatening regional security. Zimbabwe, Namibia and Angola sent troops to back Kabila. The bulk of foreign troops have withdrawn after a series of peace deals took hold.

The budget sets aside Rwandan francs 13.7 billion (US$27.4 million) to finance a program to demobilize soldiers and rebel fighters repatriated from Congo, Kaberuka said.

The small central African nation also will spend Rwandan francs 6.7 billion (US$13.4 million) on a referendum on a new constitution and presidential and parliamentary elections that would mark the end of rule by the transitional Government of National Unity.

The broad-based government came into power after former Tutsi-led rebels ended the 1994 genocide in Rwanda and overthrew the extremist Hutu government that organized the 100-day slaughter. More than 500,000 Tutsis and political moderates from the Hutu majority were killed.

"This is a very loaded agenda for a very poor and a small country like Rwanda," Kaberuka said.