The Lower House has requested the Ministry of Finance and Economic Planning to indicate strategies in place to ensure that 10.4 per cent of loans from financial institutions in the country are allocated to the agriculture sector growth in 2024, from the current 5 per cent. This move, the Lower House stated, is meant to increase the number of farmers who have access to credit. The resolution was made on Wednesday, May 24, as it adopted its Committee on Economy and Trade’s analysis of the National Bank of Rwanda’s 2021/2022 report. ALSO READ: Rwanda to double lending to agriculture “The target is to reach 10.4 per cent of agriculture share of total loans in the country under NST1, yet we are still at less than half of that, while only one year remains for NST1 to come to an end,” the Chairperson of the Committee on Economy and Trade, MP Theogene Munyangeyo told The New Times, decrying slow progress towards the goal. Munyangeyo indicated that while 69 per cent of Rwandan households – majority of Rwandans – are engaged in agriculture according to the 2022 census by the National Institute of Statistics of Rwanda, only about five per cent of the loans in the country is allotted to the sector, and has to be fixed. He said the data imply that it would be difficult to attain the desired development as long as a large proportion of the country’s population, which consists of farmers, does not have access to financing to increase agricultural output. According to lawmakers, agricultural output has not yet reached the desired level, and there are still challenges in increasing it because of issues that include climate change, low agriculture insurance, rise in fertiliser prices which led to reduced use of this farm input, and inadequate lending to the sector. ALSO READ: Census report: What do the figures show? “If we do not address the issues affecting agriculture and engage in value addition to agricultural produce [through agro-processing], it will be difficult to make progress,” Munyangeyo said. He added that factories engaged in agro-processing should be supported by lowering the interest rates on loans they need to make investments because such rates are high. Focus on agriculture to tame inflation Munyangeyo said that inflation – high commodity prices – is largely addressed through the agriculture sector [ensuring availability of adequate foods and lowering their prices], yet, the sector’s performance was low because of limited funding. For him, yields of most crops in the country are 30 per cent of their production potential, pointing out that such potential can be maximised if adequate investments in farm inputs such as fertilisers, quality seeds, and irrigation were made. According to parliamentarians, though the National Bank of Rwanda increased the repo rate from 4.5 per cent in 2020 to 7 per cent currently, with a view to controlling inflation, prices of goods and services remained high – with double-digit inflation – which was not a good thing. The Lower House recommended that there is a need for another mechanism to deal with high inflation, instead of continuing to focus on raising the central bank’s repo rate – the interest rate at which the central bank lends to banks in the country. The repo rate increases are intended to make credit expensive. When banks get loans at high rates, lawmakers argued, they pass on the increased costs to customers, making loans costlier for them. The National Bank of Rwanda indicates that monetary policy shall maintain price stability by keeping inflation within the band of 2 per cent and 8 per cent. Yet, data from the Ministry of Finance and Economic Planning show that inflation was at 21.6 per cent, compared to 2021. Such increase in prices of goods and services, it indicated, was caused by low agriculture sector output growth as a result of bad weather, and the Russia-Ukraine war that disrupted the global commodity supply chain and resulted in a hike in goods, mainly petroleum products, foodstuffs, among others. However, the data indicated that inflation had started to ease, reaching 19.3 per cent in March 2023.
