Focus Media (Kigali)
Sam Ruburika
10 January 2009
Despite the global financial crisis, Rwanda macroeconomic situation has not been seriously affected. Real growth so far has exceeded expectations at 8.5%, despite and inflation rate of 29%.
While presenting the 2008 macroeconomic performance to the development partners meeting, the director of the macroeconomic unit at the ministry of finance, Kampeta Sayinzoga, pointed out that the real sector growth is mainly due to growth in agriculture which recovered from the 2007 decline to register a 14% growth this year.
This, she said, is the result of government initiatives of agriculture intensification, use of high-quality seeds as well as extensive use of fertilizers.
So far food crops such as maize, wheat and cassava have performed well, while export crops such as coffee and tea have increased production significantly while fetching reasonable export prices until August, when the financial crisis pinch was felt.
The industrial sector continued to grow at 8% with electricity, gas and water expected to be the best performer of the year as a result of investments in hydropower. Beverage and furniture manufacturing have also continued to perform strongly.
Despite high export revenues in mining and quarrying, real growth in the sector has fallen because of a decrease in prices and challenges related to supply. As for construction materials, a lot still has to be imported due to high demand resulting from the newly-introduced mortgage instruments which have fuelled domestic private construction.
The services sector has also seen a significant growth in the 2008. This is being attributed to policies encouraging microfinance and improving banking regulations.
Moreover, the increase in food storage facilities has also helped to bring about a growth rate of over about 10% in the sector. Other areas such as public administration and education have also become stronger, but given that these sectors are highly deflationary, their real growth has been negative.
Proactive measures
On the other hand, inflation has been increasing rapidly over the last few months, mainly as a result of the international food prices which rose by 40%. High fuel prices also affected inflation though increased transport costs.
"The government has taken proactive mitigating measures," Sayinzoga said. "For instance, it has controlled the fuel price through subsidizing fuel to smoothen inflationary shocks."
Another measure has been crop intensification to increase domestic food supply so as to reduce food imports.
Moreover, the National Bank has imposed tighter controls on private sector credit and government spending to avoid excess liquidity in circulation.
On the fiscal side, there has been reduced planned spending by Frw 10 billion in 2008.
Total expenditure increased in line with the EDPRS projections by 1% compared to 2007, mainly as a result of a renewed focus on capital spending while reducing current spending.
Total revenue increased due to high budget support disbursements and increased domestic tax collection. The projected domestic fiscal deficit for 2008 is equivalent to 5.7% of GDP. Growth in domestic revenue is expected to rise again despite falling revenues from fuel taxes. Strong contributions to domestic revenue came from consumption and international trade receipt.
Non-tax revenue grew strongly this year through revenue from the new ID cards and driving licenses.
On fiscal expenditure, Kampeta Sayinzoga explained that total expenditure is now aligned to the poverty reduction and growth priorities and is expected to increase by 29.7% in 2008 with the largest contribution coming from domestically financed capital expenditure.
She stressed that expenditure on goods and services was capped this year which reflects the government's policy of fiscal decentralization where money will be transferred to districts and thus awarding them greater autonomy.
"This year transfers are expected to be high due to increase in transfers for performance-based financing in the health and education sector," Sayinzoga explained.
She pointed out that exceptional expenditures have increased this year as a result of AU peace keeping operations and the earthquake spending.
Domestic capital expenditure is expected to grow by over 71% this year, in line with EDPRS water projects, crop intensification program, community development fund as well as infrastructure development and maintenance.
Depreciation
As for domestic revenue, it is expected to increase due to higher taxpayers' compliance as well as reforms in customs to facilitate trade thus minimizing costs for importers which, according to Sayinzoga, led to a higher international trade taxes despite falling revenues from fuel taxes.
On the trade sector, she noted that Rwanda has aligned its budget to that of the East African Community (EAC) in June next year, and that EAC integration presents many opportunities.
For instance, she mentioned that increased trade within the region will result in cheaper goods and promotion of competition, as well as the development of business opportunities and knowledge sharing.
On the monetary sector, there has been a 0.1% depreciation of the Rwandan franc with respect to the US dollar in the first half of 2008, which was partly caused by higher prices of imports and policies employed to make the rate more flexible. Therefore, the Rwandan Franc is expected to slowly appreciate against the US dollar as the prices of imports gradually go down.
Be the first to Write a Comment!
Copyright © 2009 Focus Media. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.
AllAfrica aggregates and indexes content from over 125 African news organizations, plus more than 200 other sources, who are responsible for their own reporting and views. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica.
