DEVELOPMENT PARTNER'S MEETING: Donors commend Rwanda’s economic performance

Rwanda’s overall economic growth is expected to reach 9 percent. Donors noted that it is being affected by the high inflation, which stood at 21.9 percent in October Development partners have commended Rwanda’s macroeconomic stability in 2008, and have pledged continued support to the country to realise its development targets.
Development partners at recent DPM meeting.
Development partners at recent DPM meeting.

Rwanda’s overall economic growth is expected to reach 9 percent. Donors noted that it is being affected by the high inflation, which stood at 21.9 percent in October

Development partners have commended Rwanda’s macroeconomic stability in 2008, and have pledged continued support to the country to realise its development targets.

Rwanda’s real growth in 2008 is estimated at 8.5 percent, exceeding  expectations despite inflectionally pressure.

Government says that this growth was driven by the good performance in agricultural and construction industries which grew by 14.8 percent and 12.5 percent respectively.

A combined statement by all European Union countries and the European commission presented at the 8th annual Development Partners’ Meeting with government officials read.

“We have noted with great satisfaction the strong growth performance of the economy … this year. All sectors of the economy appear to be booming and growth is expected at 8.5 percent over 2008.”

“This is higher than what we have witnessed in previous years and it compares very well with rates observed elsewhere in the world,” it adds.

The two day meeting that was held at the Serena Hotel Kigali attracted among others the World Bank, the International Monetary Fund (IMF), the British Department for International Development (DFID), the United Nation (UN) and the European Union (EU).

The meeting was a forum for discussion between development partners and Rwanda’s government geared towards enhancing development effectiveness and monitor joint progress towards the realisation of the country’s Economic Development Poverty Reduction Strategy (EDPRS).

The EU says that whereas in the past the commission has often been focusing on scaling up of aid, current macroeconomic pressures may be interpreted that Rwanda is reaching the absorption capacity.

“We therefore applaud the government for adopting a conservative fiscal stance to ensure continued macroeconomic stability,” the statement read.

“We welcome the efforts that government is putting into crop intensification scheme, the improvement of the performance of the export crop sector and other ongoing agriculture interventions,” it added.

Kampeta Sayinzoga, Director of Macroeconomic Policy in the Ministry of Finance and Economic Planning said that  the agriculture sector growth was  triggered by the Ministry of Agriculture (MINAGRI)’s crop intensification programme, better quality seeds and increased use of fertilisers.

Rwanda’s economic growth was also boosted by industry and services sectors which grew by 8 percent and 6 percent respectively. However, the overall growth was in some way affected by the high inflation which stood at 21.9 percent in October.

Government says that inflation has gone up dramatically due to international food prices which rose by 40 percent in the past two years and high international fuel prices between May and September this year.

“Rising international prices has meant that some of the current inflationary pressure has been imported,” Sayinzoga said.

According to Sayinzoga, government has taken proactive measures against these problems through control of pump prices and increasing the domestic food supplies.

Rwanda’s fiscal performance is said to be in line with domestic fiscal deficit for 2008 estimated at 5 percent of the Gross Domestic Product (GDP). This is above five years’ average and is mainly financed by external budget support disbursement.

However, despite falling revenues from fuel taxes, growth domestic revenue is expected to rise above the initial projection by Rfw35b with strong contribution from consumption and international trade receipts. 

Government also projects total expenditure will increase by 29.7 percent with the largest contribution coming from domestically financed capital expenditure.

“Total expenditures are now fully aligned to poverty reduction and growth priorities” Sayinzoga said.

However development partners have advised government to adopt sufficiently flexible macroeconomic management to address the impact of the uncertainty in the global economic environment.

African countries in general and Rwanda in particular are likely to be indirectly affected by the global financial crisis in 2009 which could lead to falling demand for exports, delayed aid disbursements and a decrease in tourism.

“Rwanda’s economy has been resilient, despite the crisis in global financial markets and ongoing worldwide slowdown. However, given current uncertainties, the government must stand ready to take corrective actions, if needed to maintain macroeconomic stability,” said Lars Engstrom the International Monetary Fund (IMF) resident representative.

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