BUSINESS COMMENT: There is need to bridge gap between imports and exports

On February 24, 2009 the National Bank of Rwanda (BNR) reported an upward trend in Rwanda’s external trade, imports and exports having grown tremendously in 2008. According to figures from its department of statistics, BNR said that our export value increased by 37.5 percent, while imports increased by 54.2 percent compared to 2007. This greatly contributed to the deterioration of the exports/imports coverage ratio which was reported at 23 percent from 25.8 percent in 2007. During the same year, the value of mineral exports was USD91.26 million, representing 34.8 percent of total exports. Coffee and tea brought in USD87.1 million, accounting for 33.3 percent of total exports. The tourism sector as usual maintained its good performance. In 2008, the number of foreign visitors to Rwanda reached one million from 826,000 in 2007. The same year, tourism revenue estimates increased from USD138 million to USD214 million. These are actually tremendous performances in all the mentioned sectors. This growth trade volume is good for our standards of living in many ways. But, with the gross expenditure on imports still as high as USD1.136 billion, higher than the gross export receipts, it is a direct indication that our current account deficit is widening. And with an export growth of 37.5 percent against import increment of 54.2, imports are growing at a higher rate than exports. In 2008, Rwanda’s exports remained dominated by traditional export products such as coffee, tea and minerals, still constituting more than 68 percent of total exports. This explains why Rwanda needs to introduce new products that are attractive to the international public. Statistics further showed that the balance of goods deteriorated by 54 percent from USD -404.39million in 2007 to USD -623.48 millions in 2008 while the services balance deteriorated by 24 percent and reached USD -259.22 million from USD -208.36 in 2007. The central bank said this situation resulted primarily from the increase in the value of imports and related costs particularly on transport and insurance. Strategies for having production costs that depend on domestic conditions should be developed. As a consequence, exporters will only be required to largely battle with costs that depend on the target foreign market, like advertising and the building of reliable distribution channels. BNR has attributed growth in import value to the increase in import prices and also says that the lower growth of imports volume (9.5 percent) is essentially due to the fall in volume of food (-23.2 percent) and pharmaceutical products (-28.8 percent). One may argue that our exports largely depend on foreign demand and the value of foreign currencies, particularly the US dollar, tendencies we may have less influence over. Since Rwanda may have less control over foreign demand and the strength of the dollar, it is paramount to minimise sale of unprocessed or partially processed products. By this, our products become competitive on the international market and definitely fetch higher revenues. Contact: gahamanyi1@gmail.com