Foreign trade on import of capital goods goes up

A significant rise in import of capital goods for infrastructure development and the fast-growing transport, construction and telecommunication sectors widened the country’s trade deficit to $1.2 billion in third of the year.Figures released by National Institute of Statistics Rwanda (NISR) indicate that the country spent about $1.3 billion on imports while exports brought in $139 million—leaving a balance of payment deficit of about $1.2 billion up from $341.7 in the third quarter of 2012.According to Vital Habinshuti, the principal trade statistician at NISR, on-going improvement in the country’s investment climate has resulted in accelerated growth in sectors such as transport, construction, infrastructure and telecommunication. This, he said, had encouraged investors to import more equipment and other capital goods to scale-up their investments.“There was a big increase in importation of vehicles which lead to increased imports of petroleum products; [while] importation of mobile phones, Portland cement and other construction materials almost doubled,” he said.The country also witnessed a rise in fertilizer imports for the expanding agriculture sector.Policymakers say the rise in the demand for capital goods was caused by the ease of doing business in Rwanda as investors expand their operations and necessitating importation of more inputs that are not manufactured locally.Despite the increase in the trade deficit, the export sector performed well—bringing in $139 million compared to $110.2 earned during the same period last year.Re-exports also grew as the country’s business contacts with the rest of the world continue to expand. Figures show that $33million came in from re-export of mainly kerosene, motor spirit (gasoline) and motor spare parts to Tanzania and the Democratic Republic of Congo.These developments saw Rwanda’s total trade increased from $600.1m in third quarter of 2012 to $1,509.45m during the third quarter of this year.Minerals seem to be coming up to play a big role in the country’s export trade with Niobium and Tin ores fetching $43.95 million during the period under review. Raw coffee, the country’s traditional export, brought in $17.03 million to become the country’s single main foreign exchange earner during the third quarter of 2013.On the import side, oil products for light and high speed engines dominated the list with $792.66 million spent on the items during the period under review. The import bill for 55cc diesel or semi diesel engine consumed about $129.5 million.The country’s expenditure on imports also increased by 196 per cent in current price terms in the third quarter of 2013 compared to the same quarter of 2012.Unlike in the first two quarters of 2013, when DR Congo was leading destination for Rwanda’s re-exports, Tanzania topped the list during the third quarter of 2013 with goods worth $11.3million re-exported to the eastern neighbour. DR Congo came second with $10.9 million worth of re-exports. The fact that Rwanda now re-exports to countries such as Kenya and Ethiopia underpins the country’s growing share in regional trade.Asian influenceAfrica continues to be the first destination of exports and re-exports from Rwanda for the period under consideration accounting for over 84 per cent of total exports in all quarters.Regarding trade with regional blocs, Rwanda’s trade balance with Southern Africa Development Community (SADC countries) was balanced in the third quarter of 2013.Asia remains the main source of the country’s imports with the United Arab Emirates, China and Japan topping the list. For example, $810.31 million was spent on imports from the Arab Emirates $ 141.62 million and C $ 67.82 million from China during the third quarter of 2013.