IGIHE

Category: Economy

  • Rwanda GDP grows by 7.3% in 2016 first quarter

    {The National Institute of Statistics of Rwanda (NISR) has revealed that the Rwanda’s Gross Domestic Product (GDP) in the first quarter of 2016 grew to Rwf 1536 billion compared to Rwf 1,384 billion of the same period in 2015 a 7.3% growth. }

    The director of NISR, Yussuf Murangwa said that services emerged the best performing sector. “The Services sector contributed 46 percent of GDP while the agriculture sector contributed 33 percent. The industrial sector contributed 15 percent and 6 percent was attributed to adjustment for taxes and subsidies on products,” he said.

    Agriculture sector grew by 7 percent and contributed 2.1 percentage points to the overall GDP growth.

    Activities in the industrial sector grew by 10 percent and contributed 1.5 percentage points to the GDP growth while service sector increased by 7 percent and contributed 3.4 percentage points to the GDP growth.

    NISR says that the growth in agriculture results from exports like coffee and tea while construction and processing food products boosted the performance in agriculture sector.

    The good performance of service sector resulted from medium businesses and wholesaling transactions which grew by 11% while IT sector remained stagnant.

    “What Rwandans propensity to purchase increased,” said Yusuf Murangwa.
    It is expected that Rwanda’s economy will grow by 6% in 2016.

    The director of NISR Murangwa and the Minister of Finance and Economic Planning ,Amb.Gatete Claver

  • IMF Executive Board approves US$204 million Stand-by Credit Facility for Rwanda

    {Today, Rwanda faces consequences of price volatility of exports, gravely affecting the country’s economic performance. }

    In a bid to address the challenge, the government of Rwanda approached International Monetary Fund (IMF) to get a loan intended to support the National Bank of Rwanda in assisting exporters. IMF Executive Board on Wednesday approved to release a loan of USD 204 million (Rwf 160 billion) as a stand-by credit facility (SCF) to enable Rwanda’s economy keep a resilient status on the international market.

    According to a statement released by IMF, the loan will help Rwanda in one year and a half to balance its trade and has so far released USD 120 million.

    IMF says that the loan is a way of supporting development activities in Rwanda including poverty reduction and building the country’s resilience capacity against the world’s economic instability.

    The SCF will complement the authorities’ efforts to address growing external imbalances, by boosting reserves, with a first SDR 72.09 million disbursement (about US$102 million) available immediately. Both near and medium term adjustment policies to position Rwanda’s external position on a sustainable basis will form part of an overall strategy to support growth, support poverty reduction and improve the country’s resilience to future uncertainties in the global economy.

    The Executive Board approved the Policy Support Instrument (PSI) for Rwanda on December 2, 2013.

    Following the Executive Board’s discussion, Mr. Min Zhu, Deputy Managing Director and Acting Chair, issued the following statement:

    “Rwanda’s continued strong performance under the Policy Support Instrument has created a platform for high growth and steady poverty reduction. Growth in 2015 was buoyed by strong construction and services activity, while inflation remained contained.

    “Nevertheless, the situation has grown more challenging in recent months due to external shocks related to commodity prices and tighter conditions for private inflows. Combined with the appreciation of the U.S. dollar, these have reduced export receipts and put downward pressure on the exchange rate and official reserves.

    “Accordingly, the authorities are taking decisive steps to address external imbalances; first and foremost, through using continued exchange rate flexibility as the principal adjustment tool.This will be supported by tighter fiscal and monetary policies to help curb demand for imports. Implementation of these policies should maintain GDP growth of around 6 percent in both 2016 and 2017, while IMF financing under the Standby Credit Facility will help bolster reserves.The authorities are also accelerating policies to diversify and promote higher value exports, which should help strengthen the country’s medium-term growth prospects and its resilience to future shocks.

    “Downside risks to growth and the program remain: for example, should further shocks to commodity prices or regional and weather-related developments materialize additional adjustment policies would need to be put in place rapidly.”

    Mr. Min Zhu, Deputy Managing Director and Acting Chair of IMF

  • 2016/2017 national budget grows to Rwf 1949.4 billion

    {The Minister of Finance and Economic Planning, Ambassador Claver Gatete, yesterday, presented to both chambers of parliament the 2016/2017 national budget worth Rwf 1,949.4 billion, an increase of Rwf 140.6 billion compared to last year’s budget.}

    The 2015/2016 national budget was Rwf1808.8 billion.

    During the presentation, the minister noted that Rwf 1,216.4 (62.4%) of the budget will be financed by internally generated revenues, an increase of Rwf 40.9 compared to 2015/16 where local budget financing was Rwf 1,175.5 billion.

    Revenue collections have been projected at Rwf 1,071.6, the equivalent of 55% of the total budget and the deficit of Rwf 110.8 will be raised from sources other than taxes.

    Loans from inside the country are expected to reach Rwf 34 billion.

    Widening the tax base is among the major strategies that will help the government improve revenues for financing the national budget.

    Increased awareness campaigns on the benefits of paying taxes, improving service delivery and popularizing the usage of Electronic Billing Machines (EBM) among tax payers across the country are among the measures to increase revenues.

    External funding is expected to reach Rwf 733.0 billion, registering an increase of Rwf 99.7 billion up from Rwf 633.3 billion in 2015/2016 fiscal year.

    Foreign aid is expected to reach Rwf 365.3 (18.7%) of the national budget while loans from outside the country are expected to reach Rwf 367.7(18.9%) of 2016/2017 budget.

    The national budget reserved for recurrent activities is Rwf 958.7 billion (49.2%) of 2016/2017 budget while net lending is projected at Rwf 108.5 (5.6%).

    The budget allocated to development activities in 2016/17 is Rwf 785.3 billion equaling 40.3 % of the national budget.

    The Minister of Finance and Economic Planning, Ambassador Claver Gatete

  • South Africa avoids credit rating downgrade to ‘junk’

    {South Africa has avoided losing its investment grade credit rating from Standard & Poor’s, but the agency has maintained its negative outlook.}

    S&P held the country’s sovereign debt rating at BBB- but warned about the consequences of low economic growth.

    It had been feared the agency would cut South Africa to so-called “junk status”, making it more expensive to borrow.

    The rand extended gains to rise 3% against the dollar.

    Finance minister Pravin Gordhan said it was “important to create optimism in our economy and our country and stop making negative noises which harms us not just in the eyes of global investors, but the global public as well”.

    A cut to “junk” status would have made borrowing more expensive for Pretoria, making it harder to plug a budget deficit estimated at 3.2% of GDP for the 2016-17 financial year.

    Last month Moody’s made the unexpected decision to upgrade South Africa’s rating to a position two notches above “junk”.

    However, the agency also maintained a negative outlook, meaning that a cut could come when it next reviewed the situation.

    In deciding to keep South Africa a notch or two above “junk” status, both Moody’s and S&P are throwing South Africa a lifeline. The ratings agencies’ message is simple – get things right or suffer the consequences.

    Both have given differing reasons, but they agree on one issue: that the South African economy is not as attractive or stable as it previously was.

    To assess whether there is general consensus on how bad things are, the investment community will be waiting for Fitch’s announcement later this month.

    If South Africa wants to preserve its sovereign credit rating, it must take bold actions quickly.

    Otherwise the near future is one of a downgrade to “junk” status, which will lead to reputational damage, higher borrowing costs, disinvestment, the decline in the value of pension funds and make life more expensive for its citizens.

    South Africa has not been below investment grade since 1994.

    In December, S&P revised its outlook on South Africa’s rating from stable to negative, citing fears that economic growth might be lower than expected.

    Last month, the International Monetary Fund cut its 2016 forecast for South Africa to 0.6%, from 0.7%. The economy expanded by 1.3% in 2015.

  • Tanzania:Weakening dollar, rising exports to ease pressure on shilling

    {Shilling depreciation is expected to narrow this year as the local currency will be gaining from weaker US dollar and positive balance of payment.}

    BMI Research, a Fitch Group Company forecast the shilling on average to depreciate below 8.0 per cent against the US Dollar this year from an average of 22.4 per cent last year which compelled the Central Bank to take measures to correct the free-sliding.

    “The shilling will experience a much less rapid pace of depreciation in 2016 than in 2015,” BMI Research, a Fitch Group Company, said on its latest Tanzania Country Risk Report.

    The document gave the reason behind less depreciation in this year as due to “benefits from a weaker US dollar, positive balance of payments dynamics and improved local sentiment.”

    However, the report showed that a major risk to the country economic outlook comes from the weather. “Poor rains would not only exacerbate tight food supplies … but would also once again hamper hydroelectricity production, raising costs for businesses and by extension, consumers,” the report said.

    The country economy depends on agriculture and agro-exports inflows assist smoothening shilling depreciation, while food inflation was the major driver of rapidly rising headline inflation in 2011.

    The Bank of Tanzania (BoT) figures show that the shilling since January has depreciated around 1.5 per cent to 2,192/97 of yesterday. BoT early this month said the shilling was expected to strengthen this year as inflows are expected to improve as trends show stabilisation.

    The central bank said currently trends show the shilling has find a new market equilibrium which was good for economic stabilisation.

    The shilling has remained stable and expected to hold firm for the rest of the week, thanks to BoT intervention and end of month inflows. CRDB Bank said on its market highlights report that the end of month inflows and central bank intervention will likely stabilise the prices throughout this week.

    “We expect the shilling to remain stable supported by end month inflows and dollar supply from agricultural sector, tourism and mining that is enough to counter demand from the oil and energy sector,” CRDB said.

    International Monetary Fund (IMF) said when replying the letter early this year that the shilling depreciation was largely reflected the global strength of the dollar.

    The IMF also said domestic factors contributed to the volatility and such as the loosening of monetary policy in late 2014.

    “Staff’s preliminary assessment is that the recent depreciation has brought the real effective exchange rate, which was last assessed in 2014 to be somewhat overvalued, closer to equilibrium,” IMF report showed.

  • Fitch Ratings Affirms Rwanda at ‘B+’; Outlook Stable

    {On Friday 27th May Fitch Ratings affirmed Rwanda’s rating at ‘B+’ with Stable Outlook. }

    The key rating drivers cited by Fitch ratings balance the economy’s high growth, low inflation relative to regional peers, strong governance indicators relative to peers, and strong fiscal policy reform momentum, against low income per capita, high structural current account deficit, and continued reliance on donor flows and concessional financing.

    Fitch Ratings noted that Rwanda is facing rising balance of payments pressures due to depressed commodity prices that have adversely affected the value of its metal minerals exports. The current account deficit widened to 13.5% of GDP in 2015, from 12.0% in 2014, exacerbated by a rise in construction imports, due to ongoing investments in the country. But the deficit is forecast to narrow slightly, and to improve to 11.7% in 2017 due to monetary and fiscal policy tightening and as import substitution measures take effect.

    It also projected that donor grants will decrease from 33% of total revenues in FY12/13 to 21% in FY18 as Rwanda is implementing structural reforms to its fiscal framework to alleviate dependence on donor grants which are being phased out and converted into concessionary loans over the coming years. Continued improvement on fiscal reforms, such as efforts to widen the tax base is considered as one of the factors that could trigger a positive rating action.

    Fitch assumes Rwanda will continue to implement structural reforms and prudent economic policies with support from the IMF. Fitch assumes that broad social and political stability will be maintained in the lead-up to and during the 2017 elections.

    The Chief Executive Officer at Fitch Group,Paul Taylor

  • The government of Rwanda issues a 15 year fixed coupon Treasury Bond worth Rwf 10 billion

    {The government of Rwanda through the National Bank of Rwanda (BNR) has issued 15 year fixed coupon Treasury bond worth Rwf 10 billion as part of regular issuance plan to develop infrastructure projects and its capital market. This is the longest tenure bond issued ever since the government of Rwanda started issuing Treasury Bonds in 2008 and its oversubscription of 215.5 % shows good appetite for government’s bonds.}

    BNR employed a book building method to determine the price of the bond. The book was opened on Monday May 23rd , 2016 and closed on Wednesday May 26th ,2016.The bond was issued at par with both final coupon rate and yield at 13.5%.The bond will be listed to Rwanda Stock Exchange on Tuesday May 31 ,2016.

    This bond attracted more retail investor. Out of 57 applications received at BNR, retailers accounted for 48 orders representing 15.61% of the total amount offered , from 9.77 % in February 2016.Institutional investors and banks were allocated 50,39% and 35.00% respectively.

    Consistent awareness campaigns across the country and other information channels that were put in place were successful and led to positive results .There have been an increased number of retail and institutional investors and an oversubscription at every issuance. These results witness the confidence that investors have in the government of Rwanda in its capacity of debts reimbursement, transparent and coherent debt management policies.

    The government bond issuance calendar for next financial year 2016-2017 will be published in July 2016

  • Tanzania:Shilling retreats but on track for gain

    {The shilling has gone down by slightly over 30/- against the US dollar since the beginning of the year to yesterday. It stabilized in the last six weeks due to an increase in dollars inflow from exports which eased pressure on the local currency.}

    The shilling opened the year trading at 2,161/46 but as of yesterday it closed the session exchanging at 2,192/86 a greenback, which was a gentle slide compared to last year. The Bank of Tanzania data showed that since the beginning of this month, the shilling went down by less than 1/- from 2,191/09 to 2,192/86 of yesterday.

    On foreign exchange market the shilling stood firmly on Tuesday to close the session at 2,177/2,207 levels due to the month end dollar flows. On day-to-day basis the shilling, according to CRDB, held steadily for the last five days as it matched demand and supply in the market.

    The market is currently experiencing dollar inflows from corporate who are meeting their end of month obligations. However, another industrial player have it that the shilling may appreciate as end month obligation will push up the local currency, despite edging low against greenback on Wednesday. National Microfinance Bank (NMB) said “as we approach month end, we expect inflows to improve in favour of the shilling.”

    The bank predicted that the shilling might hold to end month as the inflows “can be expected as we start seeing month end dollar flows.” Another bank, Standard Chartered, said the shilling stability continued being the story in the foreign exchange market, despite some greenback demand from corporate.

    “The market seems to have sufficient liquidity to support said demand, and going into month end this continues being the expected trend,” StanChart said in a market report of Tuesday.

    BoT said in March’s Monthly Economic Review that value of exports of goods and services amounted to 9,636.2 million US dollars compared to 8,983.2 million US dollars in the corresponding period in 2015.

    “This was mainly driven by improved performance in travel receipts owing to increase in tourists,” BoT’s report says.

  • Economy and security to dominate G7 summit in Japan

    {Leaders of industrial nations meet in Japan to discuss economy, security and tensions in East and South China Seas.}

    Leaders of seven leading industrialised countries have converged on Ise-Shima in Japan for a two-day summit expected to focus on the global economy and international security.

    Other summit topics include terrorism, cybersecurity and maritime security, including China’s assertiveness in the East and South China Seas, where the country has territorial disputes with Japan and several Southeast Asian nations.

    Donald Tusk, the European Union president, said on Thursday that he would seek G7 support for more global aid for refugees.

    “If we [G7] do not take the lead in managing this crisis, nobody will,” he said.

    A flow of people from Syria and elsewhere to Europe has confronted the continent with its biggest refugee crisis since World War II.

    Leaders will refer to maritime security in statements issued after the summit ends on Friday, including a call for respect for the rule of law and opposition to provocative acts that try to change the status quo by force, Japanese media said.

    {{Fiscal stimulus debate}}

    Although full agreement on macro-economic policy looks hard to come by, the G7 leaders are expected to promote monetary, fiscal and structural policies to spur growth in their communique when the summit ends.

    With Britain and Germany resisting calls for fiscal stimulus, Shinzo Abe, Japan’s prime minister, will urge the G7 leaders to adopt a flexible fiscal policy, taking into account each country’s own situation.

    Some analysts say Abe hopes to use a G7 statement on the global economy as cover for a domestic fiscal package including the possible delay in a rise of the nation’s sales tax to 10 percent from 8 percent planned for next April.

    The G7 leaders are also expected to reaffirm their previous commitment to stability in the foreign exchange market.

    The G7 groups are Britain, Canada, France, Germany, Italy, Japan and the United States.

    In advance of Thursday’s meeting, Abe took G7 leaders to the Ise Grand Shrine, the most sacred site in Shinto, Japan’s indigenous religion.

    Ise Grand Shrine has 2,000 years of history and holds rituals and ceremonies to pray for world peace, a rich harvest and the prosperity of Japan’s imperial family.

    Abe has said that he hopes the shrine visit will provide an insight into the heart of Japanese culture. Critics say he is catering to a conservative base that wants to put religion back in politics and revive traditional values.

    The G7 groups are Britain, Canada, France, Germany, Italy, Japan and the US

  • G7 promises aggressive action on ‘financing terrorism’

    {Talks in Japan focus on “terror-funding” and tax evasion, but finance ministers disagree on how to boost global growth.}

    The Group of Seven major economies has pledged aggressive action in the fight against “financing terrorism and extremism”.

    Following talks in northern Japan on Saturday, finance leaders of the G7 issued an “action plan” calling for increased exchanges of information on financial intelligence, reducing the level of cross-border transactions subject to disclosure and collaborate on targeted sanctions for financial networks of outlawed groups.

    The announcement came after two days of meetings ahead of a G7 summit to be held in central Japan’s Ise region next week.

    The officials spent Friday discussing ways to use monetary policy, government spending and longer-term reforms to help support growth.

    “All of us were really able to have a candid discussion and to reaffirm the important role of the G7,” said Japanese Finance Minister Taro Aso.

    {{Disagreements on growth}}

    Having agreed to only tacit coordination of their varying strategies for boosting growth, the G7 finance meeting turned on Saturday to issues such as what the group called terrorism financing, tax evasion and support for fighting pandemics.

    Aso played down suggestions of major differences over the leeway for more government spending by countries struggling to keep deficits under control, saying each country must adapt policies to suit their own troubles and finances.

    Most of the governments of the G7 favour more pro-active government spending to help support flagging growth, while Germany has remained more conservative on fiscal matters, regarding structural reforms as crucial.

    US Treasury Secretary Jack Lew said governments and businesses needed to use all possible “policy levers” to spur growth.

    The consensus was that while there is no one-size-fits-all approach, all economies are facing a stifling lack of demand, as factories churn out more cars, clothing and computers than consumers are willing to buy.

    One looming problem for Japan is whether or not to raise its national sales tax next year from 8 percent to 10 percent. Aso has said the tax hike will go ahead barring any major crises or disasters.

    Tax evasion on agenda

    But a senior US Treasury official said it would be unfortunate if the sales tax hike ends up being a drag on the economy.

    The official, who spoke on condition he not be further identified, said “offsets,” such as other tax breaks, might be needed to compensate for the tax hike, to prevent a serious downturn.

    Japanese officials have also said they fear raising the tax will hurt demand to the extent it could reduce rather than increase government revenues.

    The issues of tax evasion and financial transparency were also on the agenda, following the release of the so-called Panama papers, which disclosed details of offshore companies set up for companies and wealthy individuals by the Panama-based law firm Mossack Fonseca.

    Companies registered in tax havens are often used for legitimate business purposes, but also can facilitate tax evasion and money laundering.

    Currencies are another hot-button issue for the financial czars.

    Lew said he hoped the talks would keep on track commitments made during recent discussions in China by the wider Group of 20 major economies, where members pledged to not manipulate exchange rates to their own advantage.

    Elsewhere, the group warned of the risks from a “shock” to the world economy if Britain votes to leave the European Union next month.

    “Uncertainties to the global outlook have increased, while geopolitical conflicts, terrorism, refugee flows, and the shock of a potential UK exit from the European Union also complicate the global economic environment,” they said after the two-day talks.

    G7 finance ministers discussed issues of tax evasion and financial transparency