Rwanda's trade deficit widened by 19.9 per cent to over $2.3 billion from January to November 2022, from over $1.9 billion in the same period of 2021, according to formal trade data from the National Bank of Rwanda and the Ministry of Finance and Planning.

A trade deficit or negative trade balance is the difference that arises when the value of imports by a country exceeds its exports.

READ ALSO: How Rwanda can reduce the growing trade deficit

On one hand, in the January-November 2022 period, Rwanda&039;s imports rose by 14.3 per cent in volume, and 27.6 per cent in value, to over $4 billion from $3.1 billion in the same period of 2021, data shows. The increase was mainly from, among others, imports of energy and lubricants, which rose by 91.7 per cent in value – due to sharp rise in prices – and 24.2 per cent in volume.

On the other hand, Rwanda's total exports recorded an increase of 19.1 per cent in quantity, and 39.4 percent in revenues to over $1.7 billion in January-November 2022, up from over $1.2 billion in the 2021 period. Such a performance was a result of, among other factors, price increase for both tea and coffee by 7.9 per cent and 40.4 per cent respectively, coupled with an increase in exports of gold by 55.5 per cent.

The deficit, the Ministry of Finance indicated, was mainly coming from higher value of imports including consumer, intermediate goods and energy and lubricants. The increase is related to the demand of domestic and hotel articles in imports of goods as social events – such as weddings, and meetings including the Commonwealth Heads of Government Meeting (CHOGM) which took place in Kigali in June 2022.

Other factors include the increase in prices of fertilisers following the Russia and Ukraine crisis, as well as the rise in fuel prices in the international market.

According to data from the African Development Bank (AfDB), as of May 2022, fertiliser prices went up by 300 per cent (tripled) as a result of the Russia-Ukraine war, which started on February 24, 2022.

The Minister of Finance and Economic Planning, Uzziel Ndagijimana, told The New Times that reducing the trade deficit by increasing the country’s export revenues "is the ambition, but it’s long term, because imports and exports are related."

"In order to be able to export, you need to invest in production. And part of the investment in production requires additional imports. Let’s say for promoting industry, we are constructing the industrial parks; we need to import machinery, spare parts, all the inputs, and semi-finished products to produce. So, the import will increase for that component," he explained.

"If prices increase globally, even if we keep the same volume, the amount we spend on import will increase.”

The Chairperson of the Parliamentary Committee on National Budget and Patrimony, MP Omar Munyaneza, told The New Times that no country can be able to live without imports, underscoring the importance of imports and exports in international trade.

"What we strive for is to reduce import bills, and increase our exports. ... We have to increase investments so as to grow our exports,” he said.

Munyaneza said the country was investing in industrialisation to boost the manufacture of locally made products.

READ ALSO: Industrialists report growth as Rwanda seeks more manufacturers

"When we are investing, imports increase and exceed exports, but when investments start yielding results, the situation is reversed. This means that if we want to attract industries in Rwanda, and we are importing the required equipment, it is understandable that we will have a huge import bill. But. when those factories have started production, we will gain from exports.

Angelique Karekezi, the Managing Director of RWASHOSCCO Ltd, a small holder specialty coffee exporting company, told The New Times that there is a need to raise coffee production as well as expand its presence on the international market for more revenue as one of the ways to deal with the trade deficit.

"Increasing productivity must also go hand in hand with ensuring quality so as to produce based on market needs, and the ever changing market dynamics," she said, emphasising the need for high-yield varieties.

Karekezi also emphasised that it is important to uproot and replace the existing very old coffee trees with a view to achieve higher productivity. Coffee trees are classified as old when they are at least 30 years old, an age when their productivity drops significantly.

ALSO READ: Over 3 million coffee trees to be replaced

In early 2020, the National Agricultural Export Development Board (NAEB) indicated that 30 per cent of the then 100 million coffee trees in the country were old and needed replacement.