Overall balance of payment set to narrow by 2012

Rwanda’s trade deficit as a share of Gross Domestic Product (GDP) is expected to fall to 11.6 percent in 2012 from 13.6 percent mid this year, according to a government economist. The projections come at a time the National Bank of Rwanda’s (NBR) 2009 first semester statistics show that the country’s trade deficient stood at $532 million (Rwf300.7b) as all major exports, except tea registered significant declines. Kampeta Sayinzoga, Director of Macroeconomic Policy Unit in the Ministry of Finance and Economic Planning said that total export values are likely to decline by 30 percent this year. “Based on semester one performance, the decline over the year maybe slightly larger,” she said. However, in the medium-term as import prices are expected to take a downward trend, the trade balance is expected to decrease. “The international economic outlook still projects a decline in international prices of our imports. So the decline could take place in semester two,” Sayinzoga said. She said that this will address the current trade deficit as government accelerates the implementation of export promotion strategies. According to the Ministry of Finance, although this year’s export values are still largely in line with projections, imports are much higher, pointing to a potential widening of the deficit which may instead worsen the overall balance of payments. Official figures show that in the financial year 2008/2009, Rwanda’s balance of trade, which subtracts imports from exports, was -$603.44m (Rwf340.9b). This means that the country imported Rwf340.9b higher than it exported. In the same period, the current account balance, which excludes transactions in financial assets and liabilities, was -$315.05m (Rwf178.2b). In 2009/10 the trade balance has so far reached -$544.61m (Rwf307.7b) while the current account is estimated at -$393.77 (Rwf222.4b). In the first half of this year total imports rose by 26.9 percent, reflecting an increase in importation of consumer goods by 48.1 percent, capital goods 31.2 percent and intermediary goods 25.7 percent. However there was a 15 percent decrease in energy importation. In the first six months of the year, Rwanda registered significant slowdown of economic activities but there are signs of recovery as government estimates show that the economy will grow by 5.3 percent in 2009/10. The Ministry of Finance says that the service sector, mainly retail, trade and transport are the most affected. Industry output also slowed, but with hopes of a modest positive growth. Construction and mining are currently the most affected. On the other hand, agriculture registered a 19 percent growth in season A harvest. Growth of Season B also expected to be positive. Officials say that government will continue to spend in order to adequately finance its Economic Development and Poverty Reduction Strategy Plans (EDPRS). In order to generate efficiency savings in the budget, government plans to rationalize expenditures. Ends

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Overall balance of payment set to narrow by 2012