Sound macro–economic policies will mitigate effects of global economic crisis

Rwanda has begun to feel the impact of the global financial crisis with a sharp decline in export earnings and domestic liquidity pressures. Rwanda’s macro-economic policies will help to mitigate the impact of the global economic crisis, according to a top official of the African Development Bank. Lamin Barrow, the institute’s Principal Country Programme Officer in an interview with Business Times, said, “For a country like Rwanda the only best option is to continue deepening the policy and structural reforms initiated under its EDPRS, which can ensure rapid recovery and enhance the resilience of the economy.” Barrow was commenting on the recently released African Economic Outlook (AEO) report for 2008/9 that indicates that the region has been gravely affected by the global economic down turn. “The Rwandan authorities have moved promptly to mitigate the impacts of the global economic crisis through the pursuit of sound and prudent macro-economic policies. These will put Rwanda in a stronger position to take advantage of the opportunities arising from the global economic recovery,” he said. He also noted that the reining of inflationary pressures and sustaining improvements in the investment climate, both on national and regional level will help mitigate the effects of the crisis. Rwanda has begun to feel the impact of the global financial crisis with a sharp decline in export earnings and domestic liquidity pressures. Due to the economic crisis, the Ministry of Finance has revised Rwanda’s growth rate to 5.7 percent from last year’s 11.2 percent. Rwanda’s own commercial banks are currently experiencing a liquidity shortage, resulting in a tightening of credit availability to private borrowers. According to Barrow, while East Africa’s growth rate is projected to slow down to 5.5 percent in 2009 and 2010, this growth rate is actually projected to be the highest when compared to other regions in Africa. “Some other factors affecting the East African region’s growth derive from the improved security situation in the Great lakes region, and the impetus from regional integration initiatives, including the implementation of tariff phase downs under the East African Community (EAC),” he said. The AEO report projects the average growth rate for East Africa at 7.3 percent in 2008, down from a very strong 8.8 percent in 2007. The report projects economic growth in Africa slowing down from over 5 percent in 2008 to only 2.8 percent in 2009, with further downward revisions inevitable. However, growth is expected to rebound to 4.5 percent by 2010. The report also provides a comprehensive analysis of economic, social and political developments on the African countries, as well as the medium term prospects for each country. In the report Ethiopia, Rwanda, Sudan, Tanzania, and Uganda, which were the fastest growing economies in East Africa in 2008, are projected to maintain a moderately robust growth in 2009 and 2010. This is because demand for their major agricultural and horticultural exports is less sensitive to the effects of the crisis.The report will be officially launched in Kigali in June this year. Ends

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Sound macro–economic policies will mitigate effects of global economic crisis