Category: Economy

Minister of Finance and Economic Planning, Yusuf Murangwa, presented the revised budget proposal to the Parliament on Wednesday, highlighting adjustments aimed at strengthening resource allocation, supporting emerging national priorities, and improving public service efficiency.

Murangwa noted that Rwanda’s economy remains resilient despite global uncertainties, including climate change, inflation, and geopolitical challenges. Strong economic growth in the first three quarters of 2024 reflects this stability.

“The Government will continue to maintain macroeconomic stability and promote inclusive growth by investing in key areas such as agriculture, climate change, infrastructure, education, healthcare and social protection,” Murangwa stated.

Key changes in the revised budget

Overall, resources will increase by Frw 126.3 billion, from Frw 5,690.1 billion to Frw 5,816.4 billion. While tax revenue forecasts have been adjusted downward by Frw 20 billion, other revenue sources—including increased privatization proceeds and external concessional loans will help offset this decrease.

On the expenditure side, the revision includes adjustments in both recurrent and capital expenditures. The development budget will rise by Frw 80.6 billion, from Frw 2,007.3 billion to Frw 2,087.9 billion.

This change affects both foreign and domestically financed capital expenditures allocated under different sectors. Meanwhile, the recurrent budget will increase by Frw 45.7 billion, from Frw 3,682.9 billion to Frw 3,728.5 billion, primarily due to an increase in pension contributions.

The revised budget for the 2024/25 fiscal year is part of the updated medium-term macroeconomic framework.

The Government has pledged continued close monitoring of all components of economic performance that may affect the implementation of the revised budget and necessary actions to ensure its full execution while maintaining macroeconomic stability.

The growth, fueled by foreign investments in Rwandan businesses and assets, reflects the country’s increasing appeal to international investors and highlights the government’s efforts to improve its investment landscape.

FDI was the dominant contributor to Foreign Private Capital (FPC), making up 80.8% of total inflows. FPC increased by 33.8% to reach USD 888.9 million in 2023.

The report attributes the remarkable growth to several factors, including robust economic performance, with Rwanda maintaining an average GDP growth of 8.2% in both 2022 and 2023.

The growth in FDI inflows was driven by significant increases in equity capital, reinvested earnings, and intra-company borrowings. Equity capital alone grew by 22.7%, while reinvested earnings rose by 36.2%. Intra-company borrowings saw the highest jump at 72.9%, reflecting confidence among international parent companies in their Rwandan subsidiaries.

Sectors leading the charge included the financial sector, which attracted 21.4% of total FDI inflows, followed by manufacturing (19.1%), ICT (13.9%), and wholesale and retail trade (13.8%). Notably, real estate activities saw a drastic surge of 1,966%, demonstrating a growing demand for infrastructure development.

Countries driving the inflows

Mauritius emerged as the top source of FDI, contributing 28.2% of total inflows in 2023. Investments from Mauritius were predominantly directed towards electricity, gas, financial services, and wholesale and retail trade.

India followed with a 12.2% share, focusing on ICT and education sectors, while Kenya accounted for 9.5% of the total, despite a decline compared to previous years. The United States, France, and Germany also significantly increased their investments, with growth rates of 86.6%, 408%, and a staggering 1,350%, respectively. These countries’ contributions were concentrated in real estate, manufacturing, and agriculture.

FDI’s impact extended beyond financial metrics, contributing to a 20.3% growth in employment within FPC enterprises. Over 10,000 new jobs were created, primarily in managerial and technical roles, underscoring the transformative potential of these investments in enhancing local skillsets and livelihoods.

The Rwandan government’s Second National Strategy for Transformation (NST2) aims to double private investment from $2.2 billion in 2023 to $4.6 billion by 2029.

Key initiatives, such as the Manufacture and Build to Recover Program (MBRP), are expected to sustain this momentum. With USD 2.38 billion already mobilized through MBRP, the government remains optimistic about meeting its targets.

The Foreign Private Capital (FPC) survey is conducted by the Central Bank, the Rwanda Development Board (RDB), and the National Institute of Statistics of Rwanda (NISR).

The Index of Industrial Production (IIP) revealed that the surge in industrial output was driven by strong performance across key sectors.

Mining and quarrying led the way with an impressive 45.2% increase, reflecting heightened activity in resource extraction.

Manufacturing also experienced substantial growth, expanding by 18.4%. This was supported by a notable 26.3% rise in food processing and a 16.6% increase in the production of beverages and tobacco. However, the manufacturing of textiles, clothing, and leather goods saw a significant decline of 39.5%.

Electricity production and supply registered a 9.6% increase, underscoring steady progress in the energy sector. Additionally, water and waste management activities grew by 12.8%, reflecting improvements in utility services and environmental management.

The November growth far exceeded the annual average growth of 8.6%, demonstrating a particularly strong performance for Rwanda’s industrial sector.

The IIP serves as a vital tool for monitoring short-term industrial performance, measuring changes in production volumes relative to the 2017 base year.

While the index excludes construction activities due to data constraints, it offers a comprehensive overview of manufacturing, mining, electricity, and utilities.

“The Index of Industrial Production serves as a tool to measure the industrial production performance of industries and provides timely estimates of broad trends,” NISR stated, emphasizing the role of IIP in tracking economic health and progress.

According to the FAO, the Food Price Index for 2024 stood at 122 points, 2.6 points lower than the 2023 average.

Despite a general upward trend in most food categories—such as dairy, meat, and vegetable oils—this increase was not enough to counterbalance the declines in cereals and sugar.

The FAO Cereal Price Index saw a notable decrease of 13.3% in 2024 compared to 2023, while the Sugar Price Index dropped by 13.2% year-on-year.

The report attributes the decline in cereal prices to falling wheat and coarse grain prices, which had a major impact on the overall food price landscape.

The funding is designed to strengthen the private sector while fostering sustainable economic growth in line with Rwanda’s Vision 2050, which emphasizes building a competitive and environmentally sustainable economy.

A key focus of the project is to promote green investments that balance economic progress with environmental preservation.

This includes supporting Rwanda’s climate goals, such as reducing greenhouse gas emissions by 38% by 2030.

Additionally, the funds will help Rwanda prepare for the global carbon market, an innovative platform where emissions reductions can be traded for financial benefits. Such efforts provide opportunities for countries like Rwanda, disproportionately affected by climate change, to secure investments from industrialized nations.

The initiative also prioritizes inclusive growth by targeting support for women-led businesses and small enterprises.

As Rwanda works toward achieving middle-income status by 2035, this investment is seen as a vital step in empowering the private sector to drive national development.

NISR Director General Ivan Murenzi announced the statistics during a joint press conference with the Minister of Finance and Economic Planning, Yusuf Murangwa, on Tuesday, December 17, 2024.

The growth was primarily driven by strong performances in the services and industry sectors, signalling continued economic resilience.

DG Murenzi highlighted that the country’s GDP at current market prices is estimated at Frw 4.806 trillion, a notable increase from Frw 4.246 trillion in Q3 of 2023. The services sector maintained its dominance, contributing 49% to GDP, while agriculture and industry accounted for 24% and 20% respectively.

Rwanda’s Q3 performance builds on earlier successes in Q1 (9.7%) and Q2 (9.8%), bringing the average growth for the first nine months of 2024 to 9.2%.

The services sector emerged as the top performer in Q3, recording a 10% growth. Significant growth within the sector was observed in wholesale and retail trade (19%), hotels and restaurants (17%), financial services (15%), and information and communication services (19%). Additionally, public administration activities increased by 10%, further contributing to the sector’s overall performance.

The industry sector experienced notable growth of 8%, primarily fueled by a significant 26% increase in mining and quarrying activities. Within this segment, exports of key minerals recorded substantial gains, with Coltan exports rising by 42%, Cassiterite exports growing by 27%, and Wolfram exports increasing by 15%.

Manufacturing also showed positive results, particularly in the production of chemicals, rubber, and plastic products, which increased by 20%, while metal products and machinery grew by 14%. However, food processing experienced a slight decline of 1% compared to its strong growth of 16% in Q3 of 2023.

The agriculture sector reported a 4% growth, driven by a 16% increase in export crop production, particularly coffee exports, which surged by 22%. On the other hand, tea production faced a decline of 10% during the period.

The funding was approved by the Executive Board of IMF following the completion of the fourth reviews under the Policy Coordination Instrument (PCI) and the Resilience and Sustainability Facility , as well as the second review under the Standby Credit Facility.

These reviews confirm that Rwanda has made significant progress in areas like fiscal consolidation, inflation control, and climate policy integration.

According to the IMF, Rwanda’s economy grew by 8.2% in 2023, driven by strong performance in services, construction, and a recovery in food crop production.

For 2024, the IMF projects growth will remain strong at 8.3%, with a slight decrease to 7% expected in 2025. Growth is projected to remain steady at 7% in 2026, with an increase to 7.2% in 2027 and a further rise to 7.3% in 2028 and 2029.

Despite a positive growth outlook, external challenges, including inflation and a widening current account deficit, have been a concern.

In 2023, inflation rose to 14%, but the IMF projects that, starting in 2024 and continuing through 2029, inflation will stabilize at around 5%.

This is in line with Rwanda’s strong monetary policies and efforts to keep inflation within the central bank’s target range.

The funding will be vital for maintaining Rwanda’s macroeconomic stability and ensuring fiscal sustainability. It will also help the government accelerate domestic revenue mobilization, which is key to expanding fiscal space and improving Rwanda’s ability to respond to economic shocks.

Additionally, the funding will support further reforms aimed at increasing public investment efficiency, reducing fiscal risks from state-owned enterprises (SOEs), and managing financial sector stability.

The IMF has also recognized Rwanda’s progress in integrating climate considerations into its economic policies.

By establishing frameworks to attract climate financing, Rwanda is positioning itself to address climate challenges and promote sustainable investment. The government is developing a green project pipeline to help attract additional climate resources, enhancing the overall impact of the funding.

Mr. Bo Li, IMF Deputy Managing Director, highlighted Rwanda’s economic resilience, noting its strong growth in key sectors and effective monetary policies.

However, he emphasized the continued need for fiscal reforms, improved revenue mobilization, and oversight of state-owned enterprises to ensure long-term economic stability.

He also praised the country’s work in advancing its climate policy, positioning Rwanda as a leader in integrating climate goals with economic development.

The state-of-the-art facility, located in the Nyamyumba Sector of Rubavu District, was opened on Friday, December 6, 2024, during a ceremony graced by Rwanda’s Minister of Infrastructure, Jimmy Gasore, alongside Joan Wiegman, Ambassador of the Netherlands to Rwanda, and Alison Thorpe, UK High Commissioner.

The port is poised to revolutionize trade and connectivity, particularly between Rwanda and the Democratic Republic of Congo (DRC).

Speaking at the launch, Dr. Gasore hailed the port as a “key milestone” in Rwanda’s commitment to sustainable economic growth and regional integration. He emphasized that Rubavu Port would play a pivotal role in improving community livelihoods by boosting trade and creating job opportunities.

Rubavu Port boasts impressive capabilities, with a capacity to handle 700,000 tons of cargo and 2.7 million passengers annually. The two-hectare facility includes cargo and passenger terminals, a wastewater treatment plant, a petrol station, and accommodations for staff.

Since its pilot phase began in June 2024, the port has been fully operational, with traders already benefiting from its modern infrastructure. The facility also provides significant employment opportunities for Rubavu residents, engaging cooperatives of porters to load and unload cargo.

Rubavu Port operates as a One-Stop Border Post, offering seamless services from agencies such as the Rwanda Transport Development Agency (RTDA), Rwanda Revenue Authority, and Rwanda National Police Marine Unit. Beyond facilitating trade, it caters to tourists exploring the scenic attractions of Lake Kivu in Rwanda’s Western Province.

The port is part of the broader National Strategic Transformation (NST1) plan, which includes the construction of three additional ports on Lake Kivu—Rusizi, Karongi, and Nkora. Once completed, these ports are expected to further ease the transport of goods and passengers, solidifying Rwanda’s position as a regional trade hub.

According to the National Institute of Statistics, the DRC is Rwanda’s second-largest export destination, with $16.2 million worth of goods exported in June 2024 alone.

Traditionally reliant on land routes, the launch of Rubavu Port marks a significant shift toward utilizing Lake Kivu for maritime trade, unlocking new opportunities for regional economic integration and growth.

Central Bank Governor John Rwangombwa made the announcement following a meeting of the Monetary Policy Committee (MPC) earlier this week.

Addressing members of the press, Governor Rwangombwa noted that in the third quarter of 2024, headline inflation decreased to 4.1 percent, down from 5.1 percent in the second quarter, and is expected to remain within the target range, averaging around 4.6 percent for the year.

Looking ahead, the Central Bank revised its inflation projection for 2025 upwards, from 5.0 to 5.8 percent, due to expected pressures on food prices from unfavourable weather conditions.

“Due to unfavourable weather conditions this season, we expect the performance of maize and key agricultural products for Season A, beginning in December, to be less favourable than initially projected,” he explained.

The Governor also warned that the projections could be affected by various risks and shocks. Heightened global geopolitical tensions, including conflicts in the Middle East and between Ukraine and Russia, could create uncertainties around international commodity prices.

Looking at the components of inflation for the third quarter, core inflation decreased to 5.3 percent, down from 6.4 percent in the second quarter of 2024. This was mainly due to a reduction in food prices, including rice and sugar.

Energy inflation slightly increased, with the Central Bank Governor attributing the rise to the base effect of solid fuels.

“The prices were very low in the same quarter last year,” he noted.

Fresh food inflation decreased to 0.2 percent from 1.6 percent, due to strong agricultural performance in the first two quarters.

The decision to maintain the country’s benchmark lending rate at 6.5 percent is expected to make borrowing more affordable compared to last year, encouraging increased spending and investments.