Rwanda’s informal export receipts slump to widen trade deficit

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m_Rwanda’s informal export receipts slump to widen trade deficit

Rwanda registered decline in the informal cross-border export receipts in the second quarter of 2014

Rwanda registered a decline in its informal cross-border export receipts that fell by 1.9 percent amounting to USD 18.5 million in the second quarter of this year 2014 up from USD 19.0 million in the first three months of this year.

The country’s informal cross border trade which involves both imports and exports traded across borders but may not formally be registered contributes much to its both export and import trade receipts. Most of these products include unprocessed agricultural products that are traded across borders on daily basis.

According to Central Bank statistics, there was a deceleration of about 4 percent  in  the country’s positive informal trade balance with neighboring countries  as imports increased by 9.7 percent to USD 3.4 million in  second quarter 2014 from USD 3.1 million in the first  quarter of the same year.

This further widened the country’s trade deficit by 12.14 percent as total exports in the first five months of this year fell by over 2 percent in value and by 3.10 percent in volume whilst imports increased slightly by 8.21 percent in value but decreased by 1.45 percent in volume.

The slight increase in volume of imports is attributed  to a rise  in consumer goods  that contributed to +1.71 percent  and capital goods of  +17.30 percent  while  intermediary goods declined by 0.75 percent due to the decline in the volume of cement imports and others similar products (-10.03percent ) which accounts   for  77.7 percent  of imports volume of intermediary goods.

As a result, trade balance deficit widened to USD 719.35 million in the first five months of the 2014 up from USD 641.41 million in the same period under review in 2013 as exports covered only 24.7 percent of imports.

“The decline observed in the entire period under review is mainly due to a decrease in prices of traditional exports such as minerals and coffee exports, which constitute 32.0 percent of the total export earnings,” said John Rwangombwa, Rwanda’s Governor Central Bank.

Central bank says the decline in coffee is due to bad weather conditions and insufficient fertilizers availed to farmers while a decline in unit price of coltan exports of about negative 28.8 percent and wolfram exports of negative 28.5 percent contributed to low export receipts from the mining sector.

Nevertheless, there is optimism that with the current efforts to improve trade within the region and mainly for Rwanda, export receipts’ outlook is likely to be positive which will improve the country’s trade deficit.

For example, United States Agency for International Development (USAID) and TradeMark East Africa (TMEA) signed a $5,700,000 Cooperative Agreement affirming their partnership under President Obama’s Trade Africa Initiative.

The initiative under the USAID Trade Infrastructure Program is aimed at improving efficiency of regional trade in Rwanda.

The program according to Mark priestly, trademark east africa’s country Manager for Rwanda will reduce barriers to cross border trade resulting to 10 percent increase in total value of exports from EAC region, 25 percent increase in intra-regional exports when compared to total exports in the region.

Again, there is anticipation that a 15 percent reduction in average time to import or export a container from Mombasa or Dar Es Salaam to Burundi and Rwanda may be achieved and also 30 percent decrease in the average time a truck takes to cross selected borders.

“These are the barriers that lead to both low volumes and value of imports and exports across borders,” Priestly noted

He notes that there is more optimism for trade to become key in improving economic and food security, sustaining investment, expanding employment, and increasing income generation in Rwanda and the East African region.

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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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