Egypt turmoil could affect Rwanda’s economy

As anti-government protesters and pro-government supporters clash in the streets of Cairo, and the turmoil in Egypt intensifies, it is likely that the effect of the increasingly bloody demonstrations will be felt in Rwanda, and the wider region, if it goes on unremittingly.The worry stems from the viewpoint of what usually happens with global oil prices when tensions affecting the Middle East rise, and considering the fact that the Suez Canal, a critical channel for petroleum products out of the region, in Egypt, might be targeted.

As anti-government protesters and pro-government supporters clash in the streets of Cairo, and the turmoil in Egypt intensifies, it is likely that the effect of the increasingly bloody demonstrations will be felt in Rwanda, and the wider region, if it goes on unremittingly.

The worry stems from the viewpoint of what usually happens with global oil prices when tensions affecting the Middle East rise, and considering the fact that the Suez Canal, a critical channel for petroleum products out of the region, in Egypt, might be targeted.

When asked for an opinion on the matter, John Rwangombwa, the Minister of Finance and Economic Planning, acknowledged that the concern is not entirely uncalled for.

 “We expect inflation to go up from 0.23 percent in December 2010 to 5.9 percent December 2011…attributed to big increase expected in oil prices due to the problems in the Arab world,” Rwangombwa noted, in an e-mailed response.

While releasing preliminary economic data for the year 2010, on Wednesday, the Minister announced that Rwanda’s economy registered a 7.4 percent Gross Domestic Product (GDP) last year, slightly higher than earlier projection of 7.2 percent, after recovering from external and domestic shocks that hit the economy in the past two years.

Roger Munyampenda, the Chief Executive Officer of the Private Sector Federation (PSF), said the political unrest in Egypt, if it goes on longer, will hurt the region’s import sector. 

“Direct suppliers or importers will be hurt... If the Suez Canal can’t operate, then (there could be a) major crisis at global level. The EAC will be affected,” Munyampenda said.
“Construction tiles are the main area to be affected, probably. EAC and China importers might take over.”

Analysts note that the ongoing uncertainty in Egypt has increased risk premiums on shipping insurance, and that drives up the cost of oil and gas imports as well as other cargo.

Meanwhile, in December last year, it was revealed that Rwanda and Egypt were in talks to forge an aviation deal that could see either RwandAir or Egyptair operate direct flights between Kigali and Cairo.

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