Category: Economy

The development was announced on Thursday 11th May 2023 during the presentation of the quarterly financial stability statement.

The decision was reached during the Monetary Policy Committee (MPC) Meeting held on 10th May to decide on the central bank rate for the next three months.

According to BNR, inflationary pressures are on declining trend, although it is still high.

As per statement presented today, inflation is expected to continue decelerating until it converges towards the target band (below 8 percent) before end of this year, owing to the effect of BNR monetary policy tightening, government policy measures, and the already decreasing international commodity prices.

Based on the projected ease in inflation, the MPC decided to maintain the Central Bank Rate at 7.0%.

The repo rate had been increased from 6.5% to 7% in February this year to tame surging inflation and continue supporting the country’s economic recovery.

The global economy is expected to grow by 2.8% against 3.4 % growth registered last year.

The Central Bank Governor, John Rwangombwa attributed the slowdown to the war between Russia and Ukraine as well as COVID-19.

Among others, he disclosed that Rwanda’s economy is projected to grow by 6.2% and expressed optimism that the country will achieve the target in consideration of the previous quarter’s situation.

The budget for the fiscal year 2023/24 will reflect the medium term fiscal path which allows for an increased spending to reach National Strategy for Transformation (NST1) goals while maintaining public debt to sustainable levels.

Despite ongoing economic recovery, Rwanda is still dealing with COVID-19 pandemic effects, climate change, high inflation, ongoing supply chain issues caused by Russia-Ukraine war among other economic challenges.

However, the Government will continue to champion economic recovery through supporting businesses affected by Covid-19 and creating jobs. On top of that, key investments in education, healthcare, ICT, and agriculture will be at the forefront of the ongoing government effort to invest in Rwanda’s future, through the National Strategy for Transformation.

“Our economic recovery has been strong despite global shocks. Government will prioritize fiscal consolidation and focus on continued economic recovery through supporting businesses affected by covid-19, easing inflation and investing in agriculture,” Minister Ndagijimana said.

Rwanda’s economy is projected to grow by 6.2 percent in 2023 compared to 8.2% in 2022. owing to global uncertainties, and by 6.7 and 7 percent in 2024 and 2025 respectively.

{{ Proposed 2023-24 budget}}

The proposed total resources estimated for fiscal year 2023/24 amount to Frw 5,030.1 billion, representing Frw 265.3 billion or 6% increase compared to Frw 4,764.8 announced in the 2022/23 revised budget.

The projected budget is comprised of Rwf3,151 billion of revenue which represents 63% of the total budget, external grants of Rwf 652.1 billion representing 13% of the entire budget and external loans will amounting to Rwf 1,225.1 billion or 24% of the total budget.

On the expenditure front, the 2023/24 budget is projected to be Rwf 5,030.1 billion. Development budget and policy lending is projected at Rwf 2,119.3 billion representing 42% of the budget while recurrent budget is estimated at Rwf 2,910.8 or 58% of the total envelop.

Key priorities for the 2023/24 national budget will include strengthening the health system; increasing agriculture and livestock productivity; scaling up social protection coverage; improving the quality of education, creating of employment opportunities through investment in public works and support to micro, small, medium and large enterprises affected by COVID-19 through the economic recovery fund and manufacture to build and recover programs.

Other interventions will include support for Made in Rwanda; promotion of digital technologies to improve service delivery; improving access to quality education; eradication of malnutrition and stunting and strengthen disaster preparedness and management among others.

{{About BFP}}

BFP is a document outlining Government economic policies over the medium term that helps lay the foundations of the next fiscal budget. It is prepared in accordance with article 34 of the Organic Law on public finance management and outlines the Government’s macroeconomic and fiscal policy stance as well as the budget policy over a 3-year horizon. The 2023/24-2025/26 BFP provides basis for the preparation of the 2023/24 budget which will be read in June this year.

Policies and strategies over the medium term are by and large guided by Vision 2050, National Strategy for Transformation (NST1) as well as the seven-year government program.

The country had experienced a decline of -3.4% in 2020 due to the impact of the COVID-19 pandemic. In 2021, the economy rebounded strongly with a growth rate of 10.9%, followed by a growth rate of 6.8% in 2022.

The report highlights the challenging global economic conditions, including the COVID-19 pandemic, the cost-of-living crisis, and geopolitical tensions such as Russia’s invasion of Ukraine, which are likely to affect the global growth rate.

As a result, the global growth rate is projected to slow down from 6.0% in 2021 to 3.2% in 2022 and 2.7% in 2023.

However, the IMF report states that inflationary pressures are expected to ease in Rwanda, with the Consumer Price Index expected to reduce from 13.9% in 2022 to 8.2% by the end of 2023 and 5.0% in 2024.

This is good news for the country, as high inflation can have a negative impact on economic growth and the standard of living of the people.

While Rwanda’s economy is expected to experience a slowdown in growth compared to the previous year, the country’s projected growth rate of 6.2% in 2023 is still relatively strong and reflects the country’s resilience in the face of economic challenges.

Governor John Rwangombwa presented this economic performance on March 29, 2023, during the Monetary Policy and Financial Stability Statement.

The Central Bank of Rwanda evaluated the economic performance in 2022 and the prospects for 2023.

The increase in exports was primarily due to the thriving manufacturing activities and high commodity prices in international markets. Traditional exports such as minerals, coffee, and tea increased by 27.7%, and non-traditional exports, such as manufactured products and horticulture, rose by 26.8% and 39.3%, respectively.

However, the import bill also increased by 26.9%, reaching $4,060 million in 2022, leading to a 20.7% increase in the trade deficit. The increase in imports was due to the continuing recovery of the national economy and the rise in global raw material and fuel prices.

This affected Rwanda’s exchange rate, leading to a 6.05% depreciation of the franc against the dollar. Additionally, the overall annual inflation increased to 13.9% in 2022 from 0.8% in 2021, primarily due to global economic turbulence and weak agricultural production in the country.

Governor Rwangombwa expressed confidence in improved economic figures in the early second half of 2023.

The Ministry of Finance will announce projections for 2023 following consultations.

The decision was reached during the quarterly meeting of the Monetary Police Committee and Financial Stability Committee held this week.

Also known as the key repo rate, the lending rate is the fee at which the Central Bank lends to commercial banks.

The meeting determines the lending rate at which commercial banks will borrow money over the next three months.

The Central Bank Governor, John Rwangombwa has said that global inflation is decreasing where it is likely to result in reduced prices in Rwanda.

He also expressed optimism that global inflation will fall below 8%.