Rwanda’s trade deficit widens as imports increase

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John Rwangombwa

John Rwangombwa

The country’s mismatch between import and export bills continued to deteriorate by 11.0 percent to U$752.62 million in the first five months of 2016 from U$677.85 million in the same period in 2015.

According to Central bank’s quarterly economic review, the expanding deficit was due to import receipts that grew by 6.7 percent in the first five months of 2016 against export receipts that declined by 6.2 percent in the same period.

“And this has put pressures on Rwanda francs foreign exchange rate,” said John Rwangombwa, National Bank of Rwanda (BNR) while briefing journalists on Tuesday noting “The franc depreciation against US dollar reached 4.6 percent in June 2016 against 3.6 percent in June 2015.”

Rwangombwa said the projects that required a lot of foreign currency included those being carried out by Positivo, a Brazilian computer assembly plant operating in Rwanda since last year, and power company Kivuwatt.

He also said other projects that had fed the demand for dollars involved work at the Kigali Convention Center and Marriott Hotel and the state-owned airline RwandAir.

He was speaking after the bank left its key interest rate unchanged at 6.5 percent. He also said inflation was expected to accelerate to between 3.8 and 4.8 percent in the next quarter due to rising food prices.

Rwanda like other countries saw export receipts decline due to falling commodity prices last year, with mining, country’s key foreign exchange earner sector, recording a poor performance.

The bank notes  an increase in inflation driven by imported inflation and a spike in food prices that saw inflation growing at 4.5 in the first quarter of 2016 from 4.1 percent in fourth quarter of 2015.

“Broadly, risks to inflation and growth remain balanced with mild inflationary pressures to reign only in short run,” the Governor assured.

Nevertheless, Rwangombwa says  the economy will  grow to the projected 6.0 percent by end of 2016 on account of the  positive real GDP growth rate of 7.3 percent in quarter one of 2016.

Again, sound financial sector with new authorized  loans growing by 18.2 percent in the first five months of 2016 will continue to foster growth, thus the Bank’s decision to maintain  its key repo rate at  6.5 percent for the third quarter  of 2016.

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About the author

Olive Ndaka is the Junior Editor for RwandaEye. An investor and young entrepreneur, she is a quick learner and has contributed many articles for RwandaEye in Kinyarwanda.

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