One would be right to say that 2022 has been such a financial rollercoaster that shrunk people’s pockets, globally.

In Rwanda, as the economy was bouncing back in 2021 after being wreaked by Covid-19 pandemic with a rebound to 10.9 per cent economic growth from a contraction of 3.4 percent in 2020, it was then crippled by inflation in the the early days of 2022.

Shocks in supply chains due to high demand for commodities when economic activities started to pick up around the world and the sanctions put in place due to the Russia-Ukraine war caused spikes in commodity prices that affected all economies.

Besides the imported inflation, the poor performance of agricultural seasons also bit hard on the Rwandan economy, with experts calling for more effective alternatives to increase productivity shielded from climate change.

According to the National Institute of Statistics of Rwanda’s Consumer Price Index, rise of commodity prices stood at 21.7 per cent in November, where food and non-alcoholic beverages increased by 45.5 per cent on an annual basis. Annual average inflation is projected at 12.3 per cent by the close of 2022.

The effect of high inflation was felt on an individual level and across all sectors, however, there have been tangible measures put in place to tame it by the government.

These include the decision to gradually increase the Central Bank rate –a fee at which it lends to commercial banks –to reduce liquidity in circulation and discourage price hikes by suppliers, and currently, the rate is at 6.5 percent.

The government also made different interventions in form of subsidies such as fuel and fertilizers which were the main drivers of global inflation. Overall, fuel subsidies on pump prices amounted to Rwf87 billion while fertilisers amounted to Rwf15.9 billion in the fiscal year 2021/2022.

This was coupled with efforts to promote domestic production and recovery through facilities dubbed Economic Recovery Fund which was refilled with $250million in May 2022, after the initial amount of $100million was used entirely in its first phase of 2020, as well as the Manufacture and Build to Recover programme which has attracted $1.7 billion (Rwf1.7 trillion) in more than 97 projects since its inception in 2021.

The programme extended tax breaks and tax credits to businesses with an aim to reduce the cost of investment for new manufacturers as well as those seeking to expand existing operations.

On the good side, Rwanda has seen recovery especially in the construction sector and the MICE (Meetings, Incentives, Conferences and Exhibitions) tourism that has greatly contributed to the slow but steady economic growth.

In terms of trading, Rwanda has taken part in the implementation of the AfCFTA Guided Trade Initiative by exporting its first consignment of coffee from Igire Coffee Limited to Accra, Ghana. A couple of other companies also followed to export coffee and tea, according to the Ministry of Trade and Investment.

The initiative seeks to test the operational, institutional, legal and trade policy environment under the African Continental Free Trade Area (AfCFTA).

This came as cross-border trade with neighbouring countries like Uganda and Burundi resumed after the reopening of borders.

And the entry of DR Congo into the East African Community is another major milestone with regional countries yet to derive value from the big market because of tensions in the Eastern region of the country.

Overall, statistics indicate that exports in volume increased to 891.9 tonnes in the first nine months of 2022 from 738.1 tonnes in 2021, generating $1 billion in revenue, a 37.3 per cent increase from $738.1 million.

This is while imports have also increased by 14.9 per cent from 2,117.6 tonnes in the first nine months of 2021 to 2,433.3 in the same period of 2022. The import bill increased by 25.9 per cent to $2.6 billion from $2 billion.

This is in part due to the increase in global commodity prices which means that the value of exports has increased but so is the cost of imports.

While the commodity prices are expected to continue rising in the first half of 2023 before coming back within the acceptable band of 2 and 8 percent, it is important also to note that the Central Bank has re-instated the reserve requirement ratio to pre-Covid level of 5 percent effective January 1st, 2023.

This is the amount of money that commercial banks are not allowed to be used in lending or investing activities.

Eyes on 2023

There are expected developments across different sectors including the establishment of a Coltan refinery plant, Africa Data Centres, fertilizer blending plant, and the regional Rusumo falls hydroelectric power plant, among others.

Straton Habyarimana, an economist based in Rwanda told The New Times that based on economic trends, he expects inflation to significantly decrease in 2023 because in such cases "the economy adjusts itself and finds an equilibrium.”

However, he anticipates that there will be challenges of credit payment in the financial sector for individuals, businesses, and the government mainly because of the franc depreciation against the dollar and the actual effects of inflation that will surface then.

The Statistics body also estimates the economy to grow by 7.9 percent next year.