Rwanda has one of the fastest-growing economies in Africa and is sometimes referred to as the ‘Singapore of Africa’ partly due to the rapid recovery after the 1994 Genocide against the Tutsi. The Rwandan economy grew by 8.7 per cent in 2019, higher than the regional average. The growth was driven by services and industry sectors which expanded by 7.6 per cent and 18.1 per cent respectively. Real GDP per capita also increased by 6.1 per cent in 2019. However, the COVID-19 pandemic now raises fresh economic challenges. The biggest questions are; what is Rwanda’s economic recovery plan? Which sectors are under consideration to accelerate recovery? The UN warns that without urgent global responses, people’s livelihoods will be in jeopardy. The warning is part of a UN framework for the immediate socio-economic response to COVID-19. As the UN’s lead agency on socio-economic impact and recovery, the United Nations Development Programme (UNDP) is keen to lead socio-economic recovery efforts. Over the next 12 to 18 months, UN teams will rollout this recovery plan in 162 countries. For Rwanda, if the rollout plan is to be effective, a comprehensive analysis needs to be done in order to ascertain the economic impact of this pandemic. The recovery plan has to consider the impact on investment, business support, education and employment. It must ensure an all-inclusive recovery. The analysis has look at some macroeconomic factors. There is shortage in funding and liquidity in microfinance institutions due to lack of demand deposits, term deposits and savings deposits that constitute almost 75 per cent of the internal sources of funds in financial institutions. The public has continued to demonstrate increased appetite for debt. Yet, banks are expected to be more prudent in lending give the slow economic activity. Capital flows into African economies largely depends on external funding and this lowers the lending capacity growth. The analysis must also examine the fact that some stock exchanges are still fragile with investors unwilling to invest in long term yielding assets in the financial markets. Non-performing loans are also increasing due to the extended debt recovery period granted by some financial institutions to borrowers. While the National Bank of Rwanda (BNR) has revised the key repo rate—the maximum rate at which commercial banks invest their money at the central reserve—a lot has to be done to boost liquidity in the financial system to ensure healthy economic recovery. Investor behavior has drastically changed. Some are now wishing to invest in stock markets only to purchase stocks at lower market price and they speculate to sell when the pandemic is over. Rwanda’s tourism industry is arguably the hardest hit by the pandemic. This is likely to worsen the balance of payment. The good news is that the government’s reaction has been swift while the response from the central bank has continued to help domestic banks to maintain sufficient liquidity. By strongly overcoming the economic recession of this global pandemic, Rwanda will not only be sending once again, another signal to the world’s economic radars but also putting naysayers to where they fittingly belong. The writer is a socio-economic commentator based in Kigali The views expressed in this article are of the author.
