Last week, a conference held in Tanzania and hosted by the International Monetary Fund aimed at sensitizing developing countries in Sub-Saharan Africa about the effects their countries would experience during and beyond the economic crisis.
During that same week, His Excellency, the President of Rwanda, Kagame Paul met with the private sector elite to discuss the effects of the crisis to Rwanda.G20 leaders will meet for a second time in London to tackle the crisis while economists worldwide debate the limitations of the commonly used Keynesian Principles.
All these efforts reiterate just how urgently a solution to this crisis is needed.
It’s a fact that Rwanda, whose economy isn’t heavily incorporated with the world economy, might not feel the immediate effect of the global downturn. However, this does not mean we are secure from any form of threat.
Let’s examine the effects this crisis might have on us.
It would be sensible to state that the number one foreign exchange earner of 2008, the tourism sector, will feel the first shocks.
A drop in tourists will mean less foreign exchange because very few people in the developed world are presently able to come to Africa for a holiday due to the fact that their salaries and jobs are being slashed.
This will, in turn, cause depreciation of our currency against major currencies such as the Dollar and the Euro and, as a consequence, our ability to import goods will suffer.
This crisis presents both an advantage however. Remember when Rwanda’s record history investor, “Dubai World”, planned to pump more than $ 200 million in hotel construction in Nyarutarama and other sectors?
Well guess what, they were caught up in the global shock and we’ll have to, how can I say it,” turn our smiles into frowns.”
The advantage of this crisis, in terms of investment, might actually be a boon for us. Since investors are running away from countries that are fully experiencing the shock and are searching for a place to safely invest, this should be an incentive for the folks at RIEPA to attract these investors.
Our Diaspora is also being affected by this economic crisis. We all know their remittances are important. Well, due to the fact that they are residing in countries that are facing the crisis head on, then must then expect their remittances to dry up.
This will, and probably already has, affected our spending and investment.
Our president had for a long time talked of reducing our dependence on foreign aid. This was an excellent idea as budgets and priorities could be allocated capital without the risk of having the taps dry out on a whim; sadly, many sectors might get less money due decreasing foreign aid.
In fact, the international aid arm of the Canadian government, CIDA, already has pulled out of many countries.
We are fortunate to be incorporated in regional trading blocs such as Common Market for East and Southern Africa and East African Community because this has reduced our exposure to the crisis hitting us since trade between African countries is still growing.
We now should promote and strengthen our local markets so that we reduce our dependency on aid and build an internal market that can stave off many of the effects of the global crisis.
The global crisis is a result of globalisation. While globalisation has been a boon to many poor and rich nations alike, this crisis proves that it isn’t the universal cure-all that many advocated. Especially for developing countries.