Rwanda’s trade deficit reduced by 5.1 per cent for the better part of last year, largely due to the ongoing Made- in-Rwanda campaign, an initiative that promotes consumption of locally-produced goods and services.
Trade deficit is amount by which the cost of a country’s imports exceeds the value of its exports.
According to the statistics, released by the central bank last week, Rwanda’s trade deficit reduced from $1,602.21 million to $1,519.97 million in the first 11 months of 2016.
The central bank’s Monetary Policy Committee said the drop was due to an increase in formal exports by 6.1 per cent as well as a decrease of formal imports by 2.4 per cent in value.
The Government has for the past two years embarked on a drive to promote Made-in-Rwanda products by encouraging more production and consumption of locally-manufactured goods.
Through the Ministry of Trade, Industry and EAC Affairs, the Government has put up strategies to improve export volume and value in the coming years to tilt the current level of trade imbalance.
On Tuesday, Francois Kanimba, the minister for trade, industry and EAC affairs, told The New Times that the impact of the initiative in reducing the trade deficit had come faster than expected.
“we expected a decrease in trade deficit but to be honest we had not quantified this on annual basis particularly on the first year,” he said.
A study conducted by the ministry estimates that the initiative will have an impact of about $450 million in the medium term.
“We are doing more analysis to understand what products had the biggest roles and which ones were most affected. In itself it’s a good outcome. In our study conducted three years back, we estimated an impact of $450m in the medium term. It takes time but it is coming,” he said.
Cimerwa sets the pace
Among the local firms that contributed to the reduced trade deficit was cement producer Cimerwa, which, Kanimba said, can still perform better as it is currently operating at 56 per cent capacity.
In August 2015, Cimerwa launched a $170 million (about Rwf126 billion) plant in Rusizi District, increasing its production capacity to 600,000 tonnes a year from 100,000 previously.
This can meet the growing local demand that currently stands at about 450,000 tonnes of cement, driven by the increasing demand for cement by the local construction and real estate sectors.
The surplus output is targeted for the export market in the region, especially Burundi and DR Congo.
During the course of 2016, Cimerwa stepped up production capacity compared to previous years. This, coupled with market penetration strategies, saw higher consumption of locally-produced cement, undoing years of high imports in the construction sector.
Kanimba said recent statements from various industries in the country show increased turnover, especially among firms producing consumer goods.
Central bank governor John Rwangombwa said while the development is positive in terms of trade deficit, it can be explained by two factors; Cimerwa starting to produce more than they have done in the past couple of years and reduction in importation of intermediate goods.
Trade deficit reduction can happen as a result of several scenarios; increased consumption of local products or reduced imports due to economic hardships.
In an ideal situation, the reduction of the trade deficit should be characterised by increased exports and consumption of locally-produced goods.
Donatien Mungwarareba, the Private Sector Federation (PSF) director for advocacy, communication and labour relations, said the impact was a result of partnerships and joint efforts between local producers and other industry stakeholders, including the Government.
“We were expecting an impact like that when we started this campaign. We need to continue reducing the trade imbalance. When we met the President last year, PSF outlined plans to reduce trade deficit by between 30 and 50 per cent in the next five years,” Mungwarareba said.
He said they had also collected feedback from clients of the various sectors with most of them happy about the quality of products. However, most clients took issue with shortfall on marketing.
“We will be focusing on marketing and outreach of locally produced products in and out of the country,” he said.