As the International Monetary Fund (IMF) advises the developing economies to exercise fiscal discipline in managing their budgets amidst the looming eurozone debt crisis, the National Bank of Rwanda (BNR) has said there is no threat to the economic development of Rwanda.
The debt crisis in the EU was sparked off by Greece’s failure to clear its interest obligations on government securities earlier this year, followed by similar problems in Portugal, Italy and Spain.
The crisis is expected to erode economic stability in aid recipient countries such as Rwanda.
“It is true most developed countries have increased their fiscal deficit but so far we have not received any message of stopping the support,” said Francois Kanimba the governor of the central bank.
Kanimba also said that the European countries that have been affected can address their fiscal policies and keep their economic partnership with developing economies.
He however said that although the world economy is recovering, if the eurozone countries revise down their public spending, it can affect Rwanda’s exports much of which goes to European countries.
According to IMF, the global environment is still uncertain in the light of the prevailing debt crisis in the eurozone. This calls for a stronger fiscal policy that will shield the developing economies from secondary effects of the crisis.
Nevertheless, the governor said that the economy is expected to grow impressively between 6-7 percent during this financial year.
A sound fiscal policy will help the country minimize its exposure to the debt crisis in the European countries with which Rwanda is a key development partner.
African countries consume €15 billion ($18 billion) in EU development aid annually. Meanwhile, EU countries have mobilized about €750 million ($924.5 million) that will be used to rescue member states faced with fiscal distress.
The Eurozone has been swept up in turmoil that has ranged from stock and bond markets to exchange rates, government spending, and tax rates. In May investors pondered the €750 billion ($950 billion) rescue plan devised by euro-zone finance ministers. The euro fell sharply. Fears that the rescue plan will not be implemented may grow.
But the real worry is that the time the plan should buy may be wasted as a result of three delusions which have overtaken European leaders.