Exports to the East African Community (EAC) countries significantly grew in the first half of the year despite poor performance in the world market, the central bank has said.
In the latest Monetary Policy and Financial Stability Statement, released yesterday in Kigali, the National Bank of Rwanda said exports to the EAC amounted to $97.8 million (about Rwf67 billion) in the first half of the year, a significant increase from $70.7 million (about Rwf48 billion) in the same period last year.
This represents a 38.6 per cent increase.
Tea, hides and skins, coffee, iron bars and rods, vegetables and malt beer accounted for the bulk of Rwanda's exports to the region.
At the same time, Rwanda's imports from the region increased by 3.7 per cent to $247.8 million from $239 million-a development that John Rwangombwa, the central bank governor, said had narrowed the country's trade deficit with EAC partner states to $150 million from $168.5 million.
Major imports from the region include cement, palm oil, fats and oils, fertilisers, second hand clothing and other articles and sugar.
Generally, the export sector did not perform as expected due to falling international commodity prices and inadequate rainfall in the fourth quarter of last year that hampered coffee exports.
"Our exports in the last three years have been growing by around 20 per cent, but have declined by 1.8 per cent in volume and increased by 1.2 per cent in value in the first half of this year," Rwagombwa said.
This, he added, widened trade deficit by 17.4 per cent, from $765.4 million to $898.6 million, and the export cover of imports fell to 24.6 per cent from 27.5 per cent in the first half of 2013.
Exports were mainly hurt by 8 per cent decline in coffee prices, 14.5 per cent pyrethrum and 30.5 per cent coltan.
Francois Kanimba, the minister for trade and industry, said government is reviewing the national export strategy aimed at diversifying exports.
"Contrary to what we have been focusing on in the past, we are now using public private partnerships to address the supply bottlenecks and market access issues in order for enterprises to grow and gain more competitiveness," he said.
The minister said several exporters are willing to sign memoranda of understanding with government institutions to boost exports.
However, he noted that the new strategy wouldn't work without facilitating exporters to access finance.
"This was one of the critical issues that were raised when we engaged exporters," Kanimba said.
He said the way commercial banks responded to credit requirements from exporters did not give them a competitive advantage, thus a need for interventions for export sector financing, including collateral for short term credit.
BNR, however, says in its bi-annual report that new loans increased by 47.8 per cent in the first half of 2014 to Rwf325.7 billion.
"Banks are always looking for bankable projects that are always willing to finance profitable projects. But if some of them can support our exports and are not that attractive and bankable the government can come and chip in like we have been doing with the fund that has been availed every year to support export promotion," Kanimba said.
The report said the economy is recovering from the slowdown of 4.7 per cent registered in 2013 and is evolving towards achieving the projected growth rate of six per cent by end 2014.
Valence Kimenyi, an economist with the World Bank, said the Ministry of Agriculture needed to increase the size of land under irrigation in order to have crop production less susceptible to the dry season.
"Monetary policy has to actively accompany the ambitious development plans for transformation of this country," Lamin Manneh, the UN resident coordinator, said.
Manneh said with access to financial services, resources in the country would be optimally used.