By Dias Nyesiga
Rwanda central bank said Rwanda’s economic performance has remained satisfactory despite headwinds from rising volatility in global markets and domestic security challenges.
Statistics indicate that despite continued volatility in the foreign exchange market that has recorded a 7.5 percent depreciation in the first half of 2016, central bank says it is upbeat the economy will continue to be resilient.
The forex volatility, attributed to an increase of 3.3 growth in import receipts compared to the contracting export value by 2.4 percent as demand for dollars from different companies and government projects continue to increase.
As a result, the country’s trade deficit continued to worsen increasing by 5.1 percent to 902.69 million from 858.98 million in the first half of 2016 further exerting pressure on the economy that grew by 7.3 percent in the first half of 2016.
The governor explained that depreciation on the other hand helps strengthen the country’s competiveness as a market, dispelling fears that the depreciation that recorded it’s highest in the last 10 years.
“This doesn’t mean really negative alone, we are not an island and we are in the global market and competitiveness matters a lot,” said John Rwangombwa, Governor of the Central Bank on Thursday
Rwangombwa while speaking at the monetary policy and financial stability statement presentation at Serena Hotel in Kigali said that the depreciation is not likely to translate into high inflation, “This depreciation does not transform into inflation and our main concern is inflation.”
According to the statement, inflation increased 4.5 and 4.9 percent in the first and second quarters of 2016 up from 1.0 percent and 2.0 percent the same periods under review with transport inflation during to 4.6 and 7.3 percent in quarter one and quarter two of 2016 respectively.
But the economy is also facing a slowdown in both net credit to government and in the stock of credit to the private sector which stood at 214.9 and 7.9 percent respectively between December 2015 and June 2016 down from 688.8 percent and 15.0 percent in 2015.
The bank indicates total exports dropped in value by 2.4 percent in the first half of 2016 to U$ 268.57 million from U$ 275.12 million after a decline of 6.3 percent in the same period of 2015.
While minerals, and tea coffee, other exports contributed negatively by 36.6 percent, 5.7 percent, 9.2 percent and 0.9 percent respectively. But export volumes increased by 16.5 percent in the same period.
Imports on the other hand grew 3.3 percent in value to U$1.171.25 million from U$1.134.10 million sith rise driven by capital goods that increased by 35.1 percent, consumer goods 3.2 percent, but energy and lubrications declined by 20.3 percent and intermediary goods 14.8 percent.
“The mismatch is mainly due to the reliance on low value expert products whose prices depend on the global market and the continued high demand of foreign produced goods,” the governor added.
Lamin M. Manneh, UN Resident Coordinator, says that the government should put more efforts into boosting domestic resource mobilization as well as strengthening the industry sector as one way of offsetting the surging import receipts.
Despite this, the Bank says the economy is expected to grow by 6 percent as earlier projected after a 7.3 growth in the first half of 2016 mainly driven by growth in industry and services sectors by 10 percent and 7 percent respectively.
Accordingly, the industry sector gained by 8.4 percent in total turnovers in the first half of 2016 with the energy sector contributing highest 65.9 percent, manufacturing 14.4 percent while mining and construction continued negatively by 36.7 percent and 0.7 percent respectively.
The services sector gained by 11.9 percent supported by financially sector which gained by 28.3 percent , information and communication sector 20.7 percent, petroleum distributors 12.3 percent as well as hotels and restaurant 16.3 percent.