In its Country Report No. 16/24 dated January 2016, the IMF offers some bad economic news for Rwanda. The bad news are mainly centered on three things:
- Imports continue to grow;
- Exports are shrinking;
- Kagame’s prestigious projects are worsening the situation;
Here is what the IMF actually states with regards to King Paul’s economy in January 2016:
“Due to imports growing faster than exports both trade and current account deficits have increased gradually, exacerbated by a trend from external grants to loans. Recent trends in mining contributed to weak exports in 2015 and should continue to do so in 2016… Monetary and exchange rate policies should help contain private import demand, but the purchases and leases of aircraft by RwandAir and imports for the Kigali Convention Center (KCC) will lead to a temporary spike in imports in 2016. Financing for government imports will be provided by donors’ agreement to accelerate 2017 budget support into the second half of 2016, and nonconcessional loans for RwandAir and KCC.”
The table below shows Rwanda imports and exports for selected months in 2012, 2013, 2014, and 2015, according to the IMF data. The red line represents imports while the black line indicates exports. King Paul’s Singapore of Africa looks more like an illusion.
In their letter of the IMF Managing Director Christine Largarde dated December 17, 2015, Rwanda’s Finance Minister Claver Gatete, and Central Bank Governor John Rwangombwa confirmed this grim reality. According to the two, “an unanticipated external shock to Rwanda’s main commodity export has begun to unfold this year. A sharp drop in mineral prices and in global demand for those products has resulted in an unexpected significant loss of export receipts and international reserves of the banking system…”
Gatete and Rwangombwa in their letter to the IMF add more bad news as follows: “Based on export performance for the first three quarters, in particular a halving of mineral export receipts, export projections for 2015 have been revised downward, from US$742 to US$664… The central bank realized the full programmed use of its reserves, which were US$986 million at the beginning of 2015, falling to US$853.4 million by end June. Thanks to some large disbursements of donor budget support that will be moved forward into CY 2015, central bank reserves are expected to meet the end-December program floor of US$ 879 million. However, to sustain imports and activity, commercial banks were also obliged to use a significant amount of reserves. Commercial banks’ NFA of US$ 150.6 million at end December 2014 was reduced to US$92.9 million by end-June and are projected to remain at this level till end December 2015.”
Meanwhile, in its current economic update on Rwanda, the World Bank states the following: “Going forward, the private sector, which is still largely informal, will have to play a bigger role in ensuring economic growth. Poor infrastructure and lack of access to electricity are some of the major constraints to private investment. In addition, reducing the country dependency on foreign aid (30% to 40% of the budget) through domestic resource mobilization is critical.”
In its operational plan for 2011–2016, UK’s Department for International Development (DFID) has an even gloomier picture. In its own words, despite economic growth rates, “huge challenges remain. 63% of the population live on less than $1.25 a day…. Poverty is largely rural and is geographically concentrated and, as a result of population growth, the number of poor people has reduced only marginally. Inequality is reducing, but it is still high and it is constraining sustainable growth and poverty reduction…Given low levels of international investment and a less-than-vibrant private sector it is not clear how much wealth growth will continue to deliver to a fast growing and largely unskilled population.”
The year 2016 should be interesting for King Paul. Let us watch the tragic drama.