22 November 2012

Rwanda: Trade Deficit Widens in Third Quarter

Rwanda's trade imbalance rose by 8.4 percent in September from the previous month as the country imported more, data from National Institute of Statistics of Rwanda (NISR) indicates.

The country's trade deficit is projected to reach 17.6 per cent this year as the country's imports grow much faster than its exports.

According to NISR, the gap widened to $337m in quarter three up from $310.7m the previous quarter , as total trade of $600.1m was made up of imports of $468.6m, exports of $110.3m, and re-exports of $21.2m.

Government, however, is optimistic to bridge the gap because it's widened by imports of equipment that are meant for bigger projects which in future will contribute to bridge the current trade deficit.

"Cement, medicaments, sugar, fertilizers and vehicles were the major imports of Rwanda during the first three quarters of this year," NISR said. Rwanda imports up to 70 per cent of cement.

On an average, between 2007 and 2010, imports of goods grew by 23.1 percent while exports grew by 12.9 percent.

Because of high demand for imports, Rwandan Franc also weakened against the dollar over the last couple of months.

The dollar franc rate closed at 626/616 on Thursday last weak, according to central bank rates. In most of the exchange bureaus around Kigali city, the dollar is selling at Rwf645.

Asia and EAC countries were the major partners for Rwandan imports, with China exports Rwanda hitting $71.5m in quarter three while Uganda attracted $68.4m in quarter two. Tanzania was Rwanda's main export destination during the period.

Rwanda imported more in current price terms in the third quarter compared to the previous two quarters and the East African Community (EAC) share in imports at 25.8 percent.

NISR show that coffee, minerals and tea were the main export for Rwanda in third quarter.

Central bank also says the economy has some "breathing space" with comfortable reserves that are still above the standard four months of imports.

Between July 2011 and July 2012, imports increased by 66 per cent. The Bank says this is a period of the year when imports are at their highest levels.

However, Rwanda's foreign exchange reserves also slid to four months of imports from six months in June, this year, affecting the franc as it fell against the dollar.

Rwanda's export to import cover, excluding cross border trader stood at 27.8 per cent as of August this year.

In a bid to address the trade deficit, government passed a national export strategy which aims at increasing export of commodities through import substitution, services and export diversification. The policy targets sectors like horticulture, mining and Minerals, crafts, tea, Coffee, ICT and Tourism.

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