Projections by the National Bank of Rwanda (NBR) show that the country’s private inflows from abroad could hit an all time high of Rwf99 billion by the end of this year
This 30 percent increment compared to last year’s inflows demonstrates that remittances constitute one of the largest sources of foreign exchange earnings for Rwanda.
Rwanda has continued to exhibit a rising trend of private inflows, and in the first semester of this year, the inflows into the economy increased by 24 percent. This has beaten analysts’ pessimistic projection that remittances (like other sectors) will drop by 15 percent this year owing to the global financial crisis. It has shown that this sector has been the most resilient to the global financial crisis.
Central Bank statistics show that from January to June of this year, Rwf48.39 billion was remitted into the economy by diaspora Rwanda. The figure is slightly higher than the Rwf47.7 billion Rwanda earned from exports in the same period.
Yet the Central Bank says that most of this money that is remitted by Rwandans working abroad finds its way into social activities, its development impact almost touches all sectors of the economy.
They increase households’ disposable incomes and demand for local goods and services as well as bridging the income inequalities. This plays a vital role in bringing down poverty levels because it boosts companies’ turnover. It spurs market expansion, output, and creates employment opportunities hence high consumer related taxes.
Being non-debt inflows, remittances like Foreign Direct Investments and capital flows help in developing the financial sector in the recipient country.
Therefore more strategic approaches should be embarked on to supplement the new Rwandan Diaspora Mutual Fund and the proposal by Kigali City Council that seeks to develop a framework to facilitate and make it easy for the Diaspora to acquire land and housing. This will result into robust growth in Diaspora money.
Such funds should be channelled through the capital market and also used to finance the development of infrastructure in the country. It will as well ease credit and liquidity constraints thereby playing a vital role in macroeconomic stability.
However, to reap more benefits from this category of inflows, government and the private sector must develop effective structures and institutions for using remittances.