Rwanda’s trade Deficit continues to widen
The country’s trade deficit continued to worsen in 2014 widening by 7.5 percent, despite a positive outlook the economy registered in the same period under review, the Central Bank has indicated.
The bank through its monetary policy and financial stability statement for February 2015, showed the deficit expanding to USD 1,799.54 million by end of December last year up from 1,674.38 million 2013 driven by increased import receipts.
Accordingly, formal imports value increased to USD 2,399.3 million representing 6.8% while volumes increased by 3.7%, mainly driven by consumer goods (+4.9%), while energy and lubricants (+3.4%), capital goods increased by 3.0%, while intermediary goods recorded (+2.9%).
The Central bank says that the rise in import value was much higher than the slight increase in the export sector that saw its total exports increasing by 4.7% in value amounting to USD 599.8 million which is down compared to 18.7% recorded in 2013.
“The fall in international commodity prices negatively affected the performance of the export sector in 2014,” said John Rwangombwa, Governor Central Bank.
Francois Kanimba, minister of Trade and Industry says that the decline in exports was attributed to fall in prices as well as non-tariffs Barriers that undermined the performance of the sector that was expected to close the deficit gap.
“The sector didn’t not grow as we had projected due to the double shocks that it faced in 2014,” he said adding with optimism that the earnings are likely to rebound in 2015.
The sector recorded a decline in mining and tea that declined by 9.9% and 6.7% respectively in value although coffee exports, tin, re-exports and non-traditional exports contributed positively increasing export earnings.
As a result the import cover by exports marginally dropped to 25.0% in 2014 from 25.5% registered in 2013 while also informal cross border export covered only 29.2% of imports down by 0.9 percent compared to what it covered in 2013.
Nevertheless, the country was able to close the year with 4.6 months of import reserves which rose from 4.5 months by end of December 2013 mainly driven by a rise in commercial banks foreign reserves, private inflows such as tourism receipts and remittances.
“We are still in comfort zone and we believe this would not affect the economy,” said Governor Rwangombwa
The economy that recovered from a slowdown in 2013 grew by 7.8 percent by end of December 2014.
To increase export earnings, the government signed performance contracts with the export sector to increase exports as well increasing bilateral relations with different countries to address the challenges of barriers to trade.