Kigali seeks IMF help to boost trade

Rwanda is seeking the International Monetary Fund’s help to improve its external trade volatilities, and boost exports.

Over the past few years, the value and volumes of exports have been declining, mainly as a result of trade limitations and external shocks.

“Several things happening at the same time — the slowdown in China, stagnation in the Eurozone because of the debt crisis… — have affected us,” said Claver Gatete, the Minister of Finance and Economic Planning.

Last week, the World Bank and the government signed a concessional loan agreement worth Rwf19 billion ($26 million) to facilitate cross-border trade between Rwanda and Democratic Republic of Congo (DRC), and to rehabilitate Kamembe airport. DRC accounts for up to 80.7 per cent of Rwanda’s total informal cross-border exports.

Although the trade deficit improved by 10 per cent in the second quarter of 2015 compared with the same period last year, experts say the gap is likely to widen due to poor export prices.

According to data from the National Institute of Statistics, the country’s total trade amounted to $614.88 million, higher by 3 per cent than in the same period last year.

Domestic exports fell by 10.07 per cent to $94.82 million in the second quarter of this year, from $105.43 million in the same period last year and fell by 6.96 per cent compared with the first quarter of 2015.

The current drop in the trade deficit was driven mainly by declining fuel prices. As of September, fuel prices had fallen from Rwf935 ($1.25) a litre to Rwf920 ($1.23), attributed to a drop in international oil prices since the beginning of August.

Andrew Mold, the senior economic affairs officer at the Sun-Regional Office for Eastern Africa of the United Nations Economic Commission for Africa, told The EastAfrican that as much as there is a clear need for growth in exports, the trade deficit is not a big threat.

“The trade deficit on a quarterly basis since 2011 has been hovering between 15-20 per cent of GDP, and seems to be settling at around 17 per cent, this is partly a result of both import and export magnitudes growing as the economy gets larger,” he said.

He, however, noted that the declining trend in exports is something to worry about.

“You need a much faster rate of growth of exports than of imports to address the trade deficit in goods the absolute volume of imports is four times higher than exports,” he said. 

According to the August monetary policy and financial stability statement, imports from East African countries, which represent 22.2 per cent of total imports, increased by 1.4 per cent from $247.97 million recorded in the first half of 2014 to $251.38 million in the first half of this year.

This widened the trade deficit by 16.2 per cent in the first half of 2015.

Carolyn Turk, the World Bank country manager in Rwanda, said the country’s trade patterns show that facilitating cross-border trade is key to the overall economy.

“Most commodities are transported by relatively low income individuals, if you make the process more efficient and reduce barriers, a lot of income can be unlocked for the economy.” she said.