Rwanda exports projected to grow by 6%

The government projects exports to rise from US$723.1 million earned in 2014 to $764.4 million in 2015 a projected 6% growth for this year.

“Last year’s export performance of 3% was because of the performance of tea and minerals which were affected by low commodity prices at the international market,” Minister of Finance and Economic Planning Amb. Claver Gatete said.

“We project imports in value terms to increase by 7% in 2015 and declining by 2% in 2016,”Minister Gatete said.

Gatete was presenting the Budget Framework Paper and medium term estimates for 2015/2016 – 2017/18 to both chambers of parliament recently in Kigali.

Budget Framework Paper is a document outlining government economic policies and medium term projections that help lay the foundations of the next fiscal year budget.

Gatete said, “Capital and intermediate goods imports will contribute a large share in 2015 for the implementation of delayed projects and will impact negatively the trade balance deficit, as well as current account balance”.

“In order to reduce reliance on donor fund, government’s key objective in the medium term remains increased revenue mobilization and expenditure prioritization,” the finance minister said.

Estimates for total domestic revenue collections stand at Rwf1, 038.1 billion (17.5 percent of GDP) and of this, Rwf938.6 billion is expected to come from tax revenue while Rwf99.5 billion will be collected from non-tax revenue.

Total donor support grants is projected to decline to 5.7% of GDP in 2015/16 declining further to 4.6% and 4.7% in 2016/17 and 2017/18 respectively from the 9.2% and 7.3% of GDP in 2013/14 and 2014/15.

“In 2015/16, total grants are projected at Rwf358.4 billion (5.7 percent of GDP) against FRW 417.1 billion (7.3 percent of GDP) in 2014/15, representing a reduction of FRW 58.8 billion,” Minister Gatete said.

The government projected total loans at Rwf233.2 billion in 2015/16, from the Rwf212.6billion in the revised budget 2014/15, an increase of Rwf20.6billion.

Total budget projections by the government for 2015/16 will therefore increase by Rwf5.9billion from the Rwf1762 (31% of GDP) it was on in 2014/15 to Rwf1768.4billion (28.8% of GDP).

“In 2015/16 fiscal year Government will implement aggressive reforms to address the vulnerability of agriculture production, ensure fast implementation of both private and public projects in the industrial sector and to promote thriving services,” the finance minister said.

“Such reforms will entail addressing energy supply constraints, prioritization of infrastructure towards productive uses; implementing a private sector led approach to exports and intensifying efforts to increase agriculture productivity,” Gatete said. Speaking about Rwanda’s economic performance 2014/15, Gatete said, “The economy grew by 7% compared to 4.7% in 2013 which was because of the good performance of the services sector which increased by 9% in 2014, the agriculture sector by 5% and the industry sector by 6%”.

“Good performance of the agriculture sector in 2014 was driven by favorable weather conditions and the different policies developed by government to improve agriculture performance,” the minister said.

“The lower oil prices and the low inflation environment that favored trade and services also contributed to the economic growth of the country in 2014,” Gatete said.

Because of the increased imports of capital and intermediate goods which was as a result of faster implementation of public investment projects in the first half of 2014 combined with the weak export growth of 3%, external trade deficit increased to 16% of GDP an increase to $1.3billion.

Inflation remained contained which was because of the food prices that did not increase much, and the low oil prices.

Rwandan Franc depreciated by 3.6% in 2014, compared to 6.1% for 2013 whereas Credit to private sector grew by 19.6% in 2014 compared to 11.1% in 2013.

“The July-December 2014 budget execution was complicated by delayed donor disbursements due to a shift in multilateral financing from grants to loans following Rwanda’s attainment of low risk debt distress status. Equally, lower domestic revenue performance played a role with a FRW 9.8 billion shortfall in tax revenue collections from FRW 416.1 billion projected for the period”, Minister Gatete said.

According to the Finance minister, “Fiscal year 2015/16 is the third year of Economic Development and Poverty Reduction Strategy (EDPRS2) implementation and is expected to consolidate on economic performance of 2014”.

“We expect the economy is expected to grow by 6.5 percent in 2015 and 2016 respectively compared to 7 percent registered in 2014,” Gatete said.

He said, “Agriculture is expected to grow by 5.2 percent, industry by 8.4 percent and services by 7.2 percent”.

Inflation is projected to remain low and not exceed 3.5 percent by end 2015. In the medium term it is expected to be contained at 5 percent.

Source: East African Business Week