Rwanda’s trade Deficit continues to widen

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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.

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