Private investments should cushion economy against foreign shocks

Government predicts that this year’s Gross Domestic Product (GDP) growth will fall to 5.8 percent down from 11.2 percent last year, definitely, because of the global financial crisis, which was initially confined in the United States. The Rwanda Development Board (RDB) has also reported investments worth USD45.6 million during April 2009, representing a 63 percent increase on investments recorded during March but less than the high-value investments secured in February of this year. The board says that the largest investments were secured in the sectors of water and energy, food processing, banking, hotel and tourism projects and construction. Private investment has always been so critical to economic growth and development. And during this period, when the global economic crisis is sweeping across the African continent, private investment especially Foreign Direct Investment (FDI) becomes even a more critical component of capital investment and job creation to many developing economies. Over the last decade, Rwanda’s economic development structure has increasingly shifted from public toward private sector approaches for achieving sustainable growth. One can realise that government is committed to removing obstacles to doing business in the country. This is aimed at increasing both local investments and FDI to spur private sector growth for the general sustainable economic development. In water and energy, food processing, banking, tourism and construction April investments have been registered in crucial sectors of the economy. These are the “spine” of the economy. They are the spine because they have a direct impact on household welfare. Last year Rwanda’s export value increased by 35.4 percent compared to imports which rose by 54.2 percent, widening the current account deficit (excluding grants) to 21.3 percent from 18.8 percent in 2007. The increase in investment should be able increase the country’s export volume and value while at the same time reducing its import bills. These investment inflows to Rwanda are optimistic especially when the Institute of International Finance (IIF), which is a banking-sector umbrella organisation, says that the credit squeeze has already affected global investment. It has reported that FDI into all emerging markets fell from USD 304bn in 2007 to USD 263bn in 2008 and predicts a further fall to USD197bn for this year. gahamanyi1@gmail.com