Rwanda’s exports increased in the first half of this year, driven by non-traditional exports despite a decline in commodity prices on the international market.
According to central bank data which was released yesterday, exports increased by 7.5 per cent outweighed by imports which grew by 18.per cent, leading to a wider trade deficit.
“Traditional exports – minerals, tea and coffee are performing negatively, but we see good performance on the non-traditional exports and this is linked to Made in Rwanda programme,” John Rwangombwa, the Governor of the National Bank of Rwanda, told the press after their quarterly economic review.
Specifically, Rwanda registered an increase in foreign exchange receipts from foodstuffs as well as re-exports, especially petroleum products on account of improved storage capacity.
Rwanda is keen on becoming a source of re-exports in the region as it also positions itself as a trade logistics hub, the Governor said.
John Rwangombwa, the Governor of the National Bank of Rwanda addresses media (Sam Ngendahimana)
The Bank says that in the period under review, Rwanda shipped in more intermediate and capital goods, which drove up the value of imports.
The increase in the import bill for intermediary and capital goods reflects ongoing investments in the economy particularly huge outlays on projects such as the Kigali Arena and the Hakan peat-to-power plant whose construction began last year in Gisagara District.
“There is a big growth of capital goods by 40 per cent in the first six months. We also see big growth of intermediary goods that grew mainly in construction and manufacturing,” the Governor noted.
Financial sector performance
Meanwhile, the central bank has decided to maintain the key repo rate at 5 per cent, saying that its analysis of the international and national economics as well as financial developments depicts a positive economic outlook.
The decision, they say, was also based on the positive trends realised during the first half of 2019, and that it aims to continue supporting private sector growth.
In the first half of the year, outstanding credit to private sector grew by 8.2 per cent from 1.8 per cent in the same period last year.
Authorised loans, too, grew by 36.8 per cent from negative 3.3 per cent in the same period.
That, according to the Bank, reflects a good economic performance, which is expected to be maintained throughout the year.
Headline inflation, which includes food and energy prices, decelerated to 0.7 per cent in the first half of this year from 1.8 per cent in the same period last year. The decline was occasioned by a decline in food and energy prices.
Core inflation dropped to 1.6 per cent from 1.8 per cent in the same period last year.
The Governor highlighted their decision to maintain the repo rate is expected to help the central bank continue support the financing of the economy and improvement in aggregate demand.
He said there were expectations that there will be modest inflation rates and moderate exchange pressures.
Financial sector performance
The financial sector also recorded growth during the period under review owing to the growth in assets and profits of commercial banks, micro financial institutions and insurance companies.
Assets of the financial sector increased, driven by growth in deposits, capitalisation of institutions as well as profits.
Total assets of the financial sector expanded by 14 per cent to Rwf4,919 billion representing 56.9 per cent of gross domestic product, up from the 12 per cent growth registered in same period.
Banks and MFIs particularly increased their pace of lending in the first half of 2019, reflecting a stronger demand for credit.
Outstanding credit to the private sector increased by 16.6 per cent to Rwf2,008 billion in the first half, compared to 9.1 per cent growth registered in the same period last year.
Loans of microfinance institutions increased by 14 per cent to Rwf162 billion, compared to 11 per cent growth registered in the same period last year.
Net profits of banks increased from Rwf22.9 billion in the first half of 2018 to Rwf26.2 billion in the second half in 2019.
Profits of microfinance institutions increased from Rwf3.3 billion to Rwf7 billion, while that of the insurance sector increased from Rwf20.7 billion to Rwf23.2 billion.
For banks and microfinance institutions increased lending, as well as recoveries from non-performing loans and written-off loans drove up profits.
According to the central bank, the improvement in insurance sector profits was mainly supported by improved performance of the motor insurance product in terms of premiums written as well as claims management.