Six major issues in central bank report that MPs want addressed

Members of Parliament have highlighted the major issues that need attention in order to support the rebound of the economy from the coronavirus challenges. The issues were highlighted during Plenary Sitting of the Chamber of Deputies held virtually on Tuesday, May 4. The session was convened to adopt the assessment of the 2019/2020 National Bank of Rwanda report by the Standing Committee on Economy and Trade. Here are six of the issues: 1. Rising insurance premiums According to MP Théogène Munyangeyo, Chairperson of the Standing Committee on Economy and Trade, in line with their Central Bank’s report analysis, insurance premiums continue to rise, mainly for fire and motor insurance. Munyangeyo recommended that the central bank, the insurance sector regulator, as well as the Ministry of Finance and Economic Planning, should give a guideline on premiums. “The focus should be put on increasing the insurance categories [and number of policy holders] instead of raising the fees,” he said. 2. Low levels of loans that go to agriculture and livestock Although agriculture is one of the most important sectors to contributed 25 per cent to the country’s Gross Economic Product in 2019/2020, it has been observed that it receives limited funding from financial institutions, thus hurting its productivity. He said that the agriculture sector grew by two per cent in 2019/2020, which is lower than 4.4 per cent in the previous financial year. Yet, the fourth Strategic Plan for the Transformation of Agriculture (PSTA4) – which runs from 2018 to 2024 targets an annual average growth rate of 10 per cent annually. “The low agriculture and livestock productivity is attributed to farming that is highly reliant on rain-fed agriculture and low investment to the sector.” 3. High cost of energy to run agricultural activities Munyangeyo added that there is an issue of high cost of electricity used to power agricultural activities such as irrigation. “The electricity tariff for irrigation projects is high, at Rwf126 a kilowatt, compared to Rwf94 per a kilowatt charged on power use in large factories,” he said. This is one of the factors that increase the cost of production and food prices. MPs requested the Ministry of Infrastructure to review the prices for energy used to power agriculture and livestock projects, especially irrigation. 4. Some 27 million coffee trees are too old, need replacement Another issue in the agriculture sector, Munyangeyo said, is that 27 million of 99 million coffee trees in Rwanda are old – they were planted over 30 years ago. This, he said, affects the productivity of this cash crop. Coffee trees are classified as old when they are at least 30 years old. The Plenary session requested the Ministry of Agriculture and Animal Resources to indicate the sustainable roadmap to replace old coffee plantations. 5. High levels of non-performing loan The MPs also due to the Covid-19 pandemic effects, there were signs that some of the borrowers will not be able to repay loans they got from banks and other financial institutions. The 2020 FinScope report, Munyangeyo said, indicated that about 33 per cent of the borrower were distressed. “Through the assessment, the Committee learnt that most of them (borrowers) were still working with their creditors so that they restructure their loan agreement such as through extending the repayment period,” he observed, adding that others will be helped through the Covid-19 economic recovery fund that the Government set up. 6. Many businesses are unable to access Covid-19 recovery fund MP Munyangeyo said though the Government established the Covid-19 recovery fund, in which it had invested Rwf100 billion, Rwf73.5 billion had already been used until June 2020. This means that Rwf26.5 billion had not yet been used. That issue, he said, was caused by the fact that some businesspeople did not meet the set criteria to be eligible for the financing. However, Munyangeyo said, there are business businesses that said that the criteria is strict, which prevented them from accessing the funding, citing those involved in vegetable and fruits, as well as public transport. The Committee found out that the responsible institutions should work with the private sector to review the criteria to access the Covid-19 economic recovery Fund. Meanwhile, the plenary session also requested the Ministry of Finance and Economic Planning to show a road map to increase the number of people who save and invest in the capital markets in order to boost availability and access to long-term investments.

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Six major issues in central bank report that MPs want addressed