Economy signals steady recovery in second quarter

• Government only expects an upward trend in economic activity in the third quarter of the year. Rwanda’s economy has begun to recover from external shocks as export and service sectors started showing positive trends in the second quarter of the year due to high government expenditure, the Finance Minister said yesterday. Prices of Rwanda’s major exports like tea and coffee have started to rise while overall economic activity is increasing smoothly as credit disbursement in the banking system took an upward trend, thrusting the construction industry. Due to the global financial crisis, Rwanda’s export earnings in the first half of this year dropped by 32 percent while the import bill rose by 26.9 percent to give a trade deficit of $ 532 million (Rwf.300.7b). The Minister of Finance and Economic Planning, James Musoni said in an interview with Business Times that economic activity has improved because of more increased budgetary spending. Government increased its spending in the 2009/10 budget by 24 percent to stimulate the economy and cushion against the global recession. “This has seen more people employed and more liquidity in the economy,” Musoni said. He added that though recovery still fragile, the decline has touched the bottom and the only expectation we have is that of an uprising trend not downwards. “The second quarter of the year looks much better than we had projected; we are likely to get slightly better results.” The Minister said that signs of recovery are evident in the banking sector, which shows an improvement in liquidity level. “Liquidity in banks is now normal as we have restored confidence in banks. There was some kind of panic and uncertainty but what we did was to assure them and put government’s long term deposits,” he said, pointing out that government has opened accounts in commercial banks as a way of boosting liquidity. “We no longer pay with cash but cheques and this keeps money within the banking system. This has helped and we are encouraging more savings mobilization.” Inflation also cooled drastically in the month of July 2009, dropping to 5.81 percent from 22.3 percent in December last year. In a parallel interview, John Rwangobwa, the Permanent Secretary in the Ministry of Finance and Economic Planning also echoed positive signs of recovery though he maintained that recovery is still fragile. While the effect of the global economic down turn did not hit hard developing countries like it was in the developed world, Rwangobwa said the effect has been equally felt. “The main effect on our economy was on the balance of payments especially the receipts of foreign exchange through exports. We had falling commodity prices our exports especially minerals,” he says. He maintained that though the economy is recovering, projected real Gross Domestic Growth (GDP) growth still stands at 5.3 percent from 11.2 percent attained last year. “We are through the bad times but we have not seen a big impact of the year to start adjusting our growth numbers.” Ends

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Economy signals steady recovery in second quarter