ECONOMY : Reviewing the year 2009

As ever times moves, 2009 as zipped by and we are already looking forward to 2010. We must look back at 2009 as a good year for Rwanda overall considering the global crisis. We kept up with steady growth and integrated further into the East African Community (EAC). This was a year that saw many of the reforms implemented in recent years rewarded with acclaim in the form of awards. They were too many to name, one was crucial – the doing business award. The new streamlined process in setting up a business allowed more new companies to be established than any year before. For the first time in recent years our own taxes have overtaken aid as the main source of government income. This was also caused by a reduction in aid and investment and prompted a loosening in fiscal discipline with a 27 percent increase in the budget. The effects were much higher urban inflation than stated and the average cost of living went up by almost a third. The Rwanda Development Board (RDB) was set up and running, a behemoth that incorporates several arms of government that it is a ministry in all but name, even superseding its line ministry Minicom. This has weakened Minicom and I wonder if it will exist for much longer. Most business people I speak to are happy with RDB. They prefer the new process of sideways integration across institutions to create a systematic approach to business. The EAC became the main focus of strategic business thinking. More regional companies moved into Rwanda than ever before, particularly in the service sector. Rwandan companies are hopefully going to think in terms of the wider market available. The free movement of goods is still a major issue, customs have been streamlined and the number of weighing stations reduced. The arrival of Tigo Rwanda made the lumbering giant that is MTN to sit up and take notice. MTN responded by listening to customers for the first time and giving them services like multimedia messaging. The effect of Tigo is yet to be seen but customers can expect call tariffs to get lower in the coming year. All these events pale in comparison to my event of the year, not many Rwandans have noticed but a seminal moment happened recently. For the first time in history Rwandans are now directly connected to the international banking grid, and foreigners can now use their visa cards in Rwanda to spend more while touring. The Rwanda banking system has always had a giant gorilla on its back in the form of SIMTEL, an outdated and inefficient switch system that was obsolete even in the 1970’s. It is the reason why we still rely on triplicate paper transfers and not electronic transfers. The decision to end the monopoly of SIMTEL is the most important in our recent history and will be reflected in growth in the banking sector. Our banking system has one hand tied behind its back, it struggles to deal with mere deposits and withdrawals. They need to move to secondary services and streamline their operations, so frontline staff can deliver services that people actually need. Economic highlights of the year 2009 Agriculture Based on MINAGRI preliminary estimates the agriculture sector production increased by 11.2 percent in volume during the 2009 season. Inflation Contrary to the situation that prevailed during 2008 that marked high inflationary pressure, the country experienced low inflation in 2009 Monetary During the first semester of 2009, money supply showed a downward trend to the slowing down banking sector credits to private sector following the liquidity crunch experience at the beginning of the year. During first semester new loans authorized by the banking system to prIvate sector compared to same period in 2008 fell by 24.02 percent Exchange Rate The Rwanda Franc exchange rate against the US dollar was quite stable during the first half of 2009 registering moderate depreciation of 7.16 percent and 11.74 percent Forex revenue dropped from $473 million to $365 million by June 2009 due to the delay in external budget support disbursements Banking The consolidated balance sheet of the 8 commercial banks increased moderately by 2.8 percent from Rwf 511 billion to Rwf525 billion as at June 2009 16 additional branches and one counter were opened by commercial banks. National Bank of Rwanda also gave it non objection to Kenya Commercial Bank to open 7 branches Capital Markets Companies like BRALIRWA, MTN and CIMERWA have expressed interest in issuing corporate bonds, one municipal band from Kigali City Council (KCC) is undergoing ramaisibo@hotmail.com Ends