Although aid suspensions and delays in disbursement of donor budget support in 2012 largely caused slow economic growth last year, a decline in agricultural productivity and high interest rates is also to blame, Finance minister Claver Gatete has said.
The economy grew at 4.6 per cent in 2013 having declined from 7.5 per cent in the previous year-the lowest in about a decade.
"A combination of these three major factors (aid, agriculture productivity and interest rates) was the reason the rate of economic growth slowed down during 2013," Gatete told The New Times in an interview.
Gatete said that that appropriate measures and policies to take the economy back to a higher growth rate are in the offing.
"We are putting strong measure in place that will ensure the economy gets back on track. These include, among many others, maintaining a strong macroeconomic stability and fiscal policy. Our [growth] projections for this year will be ready very soon," Gatete said.
The National Bank of Rwanda last week maintained its Key Repo rate at 7 per cent, saying it was intended to sustain and support a steady follow of credit to the private sector so as to accelerate economic growth.
The rate of credit flow to the private sector declined from 35 per cent during 2012 to 10 per cent in 2013-causing the economy to slow down growth by 3.9 per cent, according to the World Bank's Rwanda Economic Update, Firth Edition.
Peace Aimée, an economist at World Bank, said that the situation led to a reduction in private sector led services of 1.1 per cent during the third quarter of 2013 as compared to 2 per cent during the second quarter 2013 and 4.4 per cent in 2012.
The situation had an overall affected on the general performance of the major sectors especially agriculture, industry and the service sector.
According to EDPRS2 blueprint, economic growth rate is projected to hit record high of 11.5 per cent by 2018, achieve gross domestic per capita of $1,200, create 200,000 jobs annually and reduce poverty to below 30 per cent.
The situation was worsened by a reduction in crop production of minus 10 per cent during second season of 2012, according to the Crop Assessment report 2012/ 2013 from Ministry of Agriculture.
Innocent Musabyimana, deputy director general in charge of agricultural extension at the Rwanda Agricultural Board, said the new plan to double production of major crops per hectare from 2.5 tonnes to 6 metric tonnes is already in place and yielding good results.
This financial year, the government allocated Rwf 54 bilion to the ministry for land husbandry, hillside irrigation and water harvesting.