The global rise in fuel prices has been cited by the African Development Bank as a significant risk to the East African region’s economic recovery. The bank noted in its latest economic outlook that the region is expected to recover to an average of 4.1 per cent in 2021 and further to 4.9 per cent in 2022. However, the rising global oil prices were cited as a major downside risk given that most East African countries are net oil importers. “Though the anticipated increase in oil prices is good news for the region’s few oil-exporting countries, it remains a major risk to the economic recovery for the rest,” the report said, “Forecasts project a consistent increase in global oil prices from $41 a barrel in 2020 to $65 a barrel in 2021 and $66 a barrel in 2022.” The projected increases, the bank said would reflect the costs of production and doing business in the region’s oil exporters, which is not only inflationary but also lowers aggregate demand. In a response to rising fuel prices, the Rwandan government adjusted its fuel subsidy intervention to cushion Rwandan consumers against increased cost of living. In October, the Rwanda Utilities and Regulatory Authority announced that diesel prices would remain unchanged at Rwf1054 per litre despite the global increase in prices. Petrol prices rose to Rwf1143 per litre from Rwf1,088. Without government intervention, prices of diesel and petrol would have risen by Rwf110 and Rwf80 respectively, to about Rwf1,134 and Rwf1,198. The report points out that there is need for better economic governance to stabilize and reduce the public burden in East Africa. Other key actions include improving debt management and transparency and dealing with debt related to state-owned enterprises and contingent liabilities in some of the region’s largest economies. Commenting on the report, Claudine Uwera, the Minister of State in charge of Economic Planning at the Ministry, said that with regard to concerns of rising debt levels, Rwanda’s approach includes maximizing concessional borrowing avenues and only commercially borrowing for projects with high commercial returns. A concessional loan is credit that is extended on terms substantially more generous than market loans usually by international development financiers, such as the World Bank, African Development Bank, among others. The loans have significantly low-interest rates and long grace periods with the possibility of revising terms further. She said that the approach serves to finance economic recovery at the same time serving to keep debt levels low.
