The Central Bank on September 9, updated the country on the state of the economy in the first half of the year during the twice-yearly Monetary Policy and Financial Stability Statement. During the update led by Governor John Rwangombwa, the central bank made updates of key economic aspects.

Below are the key highlights.

1. Rwanda reports growth in exports revenues

The Central Bank reported that there was a rise in exports receipts in the first half of 2021 by 16 per cent with revenues amounting to $672.2 million up from $579.5 million in the first half of last year.

The recovery saw traditional exports rise by 30.2 per cent while non-traditional exports by 63.6 per cent.

Traditional exports which comprise of coffee, tea, minerals, pyrethrum and hides rose 30 per cent to $130.9 million from $100.5 million.

Minerals (Cassiterite, Coltan, Wolfram) amounted to $60.8 million from $34.8 million in the first half of 2021 while quantities rose by 45.5 per cent to 3.3 thousand tonnes.

On the other hand, Rwanda’s imports payment rose to $1618.1 million from $1524.6 million in the same period last year, an increase of 6.1 per cent driven by an increase in demand for consumer goods, intermediate goods and capital goods.

Capital goods are those that are used in producing other goods while Intermediate goods are goods, such as partly finished goods, used as inputs in the production of other goods including final goods.

Imports on consumer goods increased by 10.7 per cent to 389.9 million due to increased demand for food and non-food imports.

Intermediate goods categorized as industrial inputs, construction material and fertilizer rose by 16.5 per cent to $386.3 million while capital goods grew 22.4 per cent to 381.2m due to payment of electrical equipment to support power sector growth.

2. Growing confidence in economic recovery

The central bank update noted that Rwanda’s economy continues to recover from the impact of the Covid-19 pandemic which saw the economy contract by 3.4 per cent in 2020. After going through what was defined as a rough patch, the central bank noted that they can notice a gentle turning point.

The economy is projected to grow by 5.1 per cent in 2021.

In the first quarter of the year, the key sectors that drove supporting Rwanda’s economic recovery are agriculture growing by 6.8 per cent and industry at 9.7 per cent.

A slow recovery in the entire services sector was partially offset by the good performance in the information and communication sub-sectors, and the financial services. Majority of the service sector was affected by slow growth in the hospitality sector and aviation.

In the first half of 2021, headline inflation eased to 1.4 per cent.

Thierry Kalisa, the Chief Economist at the central bank noted that interventions such as Manufacture and Build to Recover Programme, will further drive recovery due to its trickle down potential.

3. Cashless payments continue to grow

Rwanda continues to adopt digital payments in line with national ambitions of a cashless economy, statistics indicate.

The central bank noted that Covid-19 related interventions facilitated the adoption of digital payments spurring increased usage as evidenced in the increases in numbers of subscribers of mobile payments, mobile banking and internet banking.

For instance; in the first half of 2021, the number of mobile banking subscribers increased by 11 per cent to over 2 million, the number of transactions increased by 13 per cent to over 2.9M transactions, while the value of transactions increased by 98 per cent to Rwf209.8 billion.

The value of mobile payments stood at Rwf5,190 billion in the first half of the year from about Rwf2,580 million in the same period last year as subscribers rose to over 6 million users making over 420 million transactions.

Peace Uwase, the Director-General of the Financial Stability at the Central Bank, said that this is a positive trend with expectations that it would be replicated in other financial services beyond payments including savings, credit and insurance among others.

At the same time, The National Bank of Rwanda (BNR) has warned businesses against transferring the recently reintroduced fees on MoMo Pay transactions to clients.

4. Loans are getting cheaper

The central bank noted that the lending rates had dropped albeit slightly to average at 15.91 per cent in the first half of the year from about 16.25 in the same period last year.

The average lending rate has been dropping slowly, standing at 16.31 per cent in 2020 from 16.47 per cent in 2019 and 17.07 per cent in 2018.

The continued drop creates for further drop over time consequently improving access to finance and capital.

The drop in cost, though minimal, means that if one borrows Rwf100,000 payable over a 5 year period, they would pay interest of Rwf79,550 compared to Rwf85,350 in 2018.

The drop was explained as a result of a significant share of long term loans usually priced at lower costs. The decline in lending rates was experienced both among corporate and individual loans.

5. Financial sector position to support recovery

The financial sector remains adequately capitalized to support the economic recovery ambitions with newly authorized loans growing in the first half of the year. This was mostly reflected in major sectors like restaurants and hotels, personal loans, public works and buildings, and services provided to the community.

However, the non-performing loans ratio in banks increased from 5.4 per cent in June 2020 to 5.7 per cent in June 2021.

The loan quality drop was expected given the Covid-19 related challenges with Rwangombwa noting that the banking sector is well capitalized to make provisions for loans that could struggle to resume making payments.

He added that they expected continued engagement and support by the government as has been the case through initiatives such as the economic recovery fund.

There is unlikely to be an influx of properties up for auction in the local market on the basis of inability to service debts as a result of the economic slowdown due to Covid-19, the central bank recently allayed fears. The recent property auctions that had caused concern among a section of Rwandans were explained as debts that went bad as early as 4 or 5 years ago.