Category: Economy

This is according to a report by the World Bank and the Government of Rwanda, which highlights the state of the country’s economy and outlines the steps needed to achieve inclusive and sustainable development in alignment with the second National Strategy for Transformation (NST-2).

Gorilla trekking activities are expected to generate the most revenue for the tourism sector, at $200 million in 2024, followed by other leisure activities ($110 million), conferences ($90 million), visiting friends and relatives (VFR tourism/travel) ($86 million), business travel ($68 million), and revenue from other visitors ($46 million).

Nature-based tourism (NBT) is estimated to account for 80 percent of visitors entering Rwanda for leisure or conferences, playing a significant role in job creation, particularly by increasing formal jobs in rural communities near game parks.

The new report, titled Pathways to Sustainable and Inclusive Growth, was launched on Wednesday, November 13, 2024, in Kigali at a ceremony presided over by Prime Minister Édouard Ngirente.

According to the report, the rapid recovery and expansion of the tourism sector following the COVID-19 pandemic, which slowed the country’s biggest foreign exchange earner, is a key objective for the government.

The World Bank said that achieving this will require additional financial resources from the non-state sector to support fast-growing productivity gains.

The report further highlights Rwanda’s human capital as a cornerstone for achieving long-term growth. It recommends sustained investment in education, skills development, and healthcare. The authors of the report note that by nurturing a skilled and healthy workforce, Rwanda can unlock new growth potential across generations.

The report also emphasizes opportunities in nature-based solutions to address climate risks and advance the country’s development goals.

Prime Minister Ngirente expressed the government’s commitment to leveraging lessons learned from the study to address the challenges identified.

“Rwandans are eager for development, and our government is committed to pushing forward toward the aspirations of Vision 2050. Despite facing external shocks and challenges, even in difficult times, we are determined to keep moving forward,” the Prime Minister stated.

The Minister of Finance and Economic Planning, Yusuf Murangwa, affirmed that Rwanda’s impressive progress over the past years has laid a solid foundation for economic growth and social well-being.

“To achieve the ambitious targets set in NST-2, we must now prioritize enhancing productivity, fostering private sector engagement, and investing in our people. The CEM provides a strategic framework to address these priorities, guiding us toward a more inclusive and resilient economy,” he stated.

World Bank Country Manager, Sahr Kpundeh, emphasized the strength of the partnership between the Government of Rwanda and the World Bank, noting that the collaboration underscores a shared commitment to Rwanda’s vision for sustainable growth.

“The Rwanda Country Economic Memorandum (CEM) recommendations provide clear pathways to greater economic resilience and shared prosperity. With strategic policy adjustments, we are confident that Rwanda can foster a diversified economy that benefits all Rwandans,” Kpundeh stated.

The funds will be made available to Rwanda upon the completion of an economic review by the IMF Executive Board in mid-December.

A team from the IMF concluded a two-week mission on Tuesday, October 22, 2024, to assess the country’s economic performance, praising its strong growth momentum despite external shocks.

The IMF team, led by Reuben Atoyan, stated that Rwanda’s real GDP is projected to grow by 8.3% in 2024. According to the IMF, this growth is driven by strong performances in the services and construction sectors, as well as a recovery in food crop production.

The team observed that despite external challenges, inflation remains under control, staying within the central bank’s target range of 2% to 8% due to favorable food prices and a tight monetary policy.

Atoyan highlighted that the 6.6% depreciation of the Rwandan Franc against the US dollar was a necessary measure for facilitating essential external adjustments, while international reserves stood at 4.5 months of prospective imports by mid-2024, providing a buffer against external shocks.

“Despite the challenging environment, macroeconomic policy performance through the end of June 2024 remained aligned with program objectives under the PCI/SCF arrangement. All quantitative targets were met, and reforms aimed at enhancing the transparency of public investments and strengthening foreign exchange market functioning are progressing well,” Atoyan stated.

The IMF representative emphasized the Rwandan government’s strong commitment to implementing climate-related reforms under the RSF arrangement, with measures for climate budget tagging, improving the climate resilience of public investments, adopting sustainability disclosure standards, and developing a green taxonomy on track for completion in the coming weeks.

The IMF team acknowledged that recurrent shocks in recent years have complicated the government’s goal of rebuilding policy buffers. Fiscal consolidation has progressed more slowly than anticipated, resulting in a continued increase in the public debt-to-GDP ratio.

However, the government has reiterated its commitment to fiscal prudence, focusing on concessional financing and advancing a medium-term revenue strategy to stabilize its fiscal position.

The purchase of the treasury bonds began on October 21 and will close on October 23, 2024.

Treasury bonds are a means used by the government to raise funds for national development activities.

Depending on the required funds, the government determines the value of the treasury bonds issued, which are also seen as investment opportunities for individuals looking to save for the long term.

When a person purchases treasury bonds, they are effectively lending money to the government, receiving interest. They will be reimbursed the amount they spent to buy the bonds when the maturity period ends.

The Rwandan government started the program to raise resources through treasury bonds in 2008.

In Rwanda, the main buyers of treasury bonds include financial institutions, insurance companies, and individual investors, who have increasingly participated in this market, especially after a major awareness campaign explaining their benefits that started in 2014.

The Rwandan government has also put significant effort into providing opportunities for treasury bondholders, as they can use them as collateral in banks to obtain loans that promote their development.

According to NISR, the CPI for September 2024 increased by 1.2 percent compared to August 2024.

Prices for ‘Food and Non-Alcoholic Beverages’ decreased by 4.5% on an annual basis, but saw a monthly increase of 2.5%.

The ‘Housing, Water, Electricity, Gas, and Other Fuels’ category also recorded a 4% increase year-on-year, with a slight monthly rise of 0.1%. Transportation costs surged by 18.2% annually, with a modest monthly increase of 0.1%.

Additionally, the data show that prices for “local products” rose by 1.3% year-on-year and 1.5% month-on-month. Meanwhile, “imported products” saw a 6.3% increase annually and a 0.4% rise on a monthly basis.

Prices for “fresh products” decreased by 4.3% year-on-year but experienced a significant monthly increase of 4.7%. In contrast, “energy” prices increased by 2.7% annually but dropped by 1.5% month-on-month.

Excluding fresh products and energy, the general index increased by 5% on an annual basis and 0.4% on a monthly basis, highlighting the broader inflationary pressure in the economy.

The first edition of B-READY assessed the business environments of 50 global economies, focusing on three pillars: regulatory frameworks, public service delivery, and operational efficiency. The report focuses on ten indicators, which include Business Entry, Business Location, Utility Services (water, electricity, and internet), Labour Force, Financial Services (access), International Trade, Taxation, Dispute Resolution, Market Competition (Public Procurement), and Business Insolvency.

Rwanda performed exceptionally well in several key areas. In terms of Operational Efficiency, the country earned an impressive score of 81.31%, ranking 3rd globally. For Public Services, Rwanda scored 67.37%, placing 8th in the world. Additionally, the country achieved a score of 70.35% in the Regulatory Framework, securing the 17th spot globally.

The scores position Rwanda as one of the top-performing countries worldwide and the top-performing country in Sub-Saharan Africa.

In terms of operational efficiency, Rwanda remains one of the fastest countries in Africa and globally for company registration. This efficiency stands in contrast to global averages of 32 days for domestic firms and 39 days for foreign firms, reinforcing Rwanda’s position as a regional leader in ease of doing business.

Other measures that have encouraged investments include free online business registration, automated tax filing and payments, one-stop center services for business permits and licenses, and support for foreign ownership and ease of profit repatriation.

In Public Services, Rwanda’s digitization of public services has been a key driver of its strong performance. Systems like the Integrated Electronic Case Management System (IECMS) for the judiciary and the e-titles system for land services have streamlined processes, reducing both the time and cost of doing business. These innovations play a vital role in enhancing the overall business environment.

Additionally, Rwanda’s regulatory reforms continue to enhance its global competitiveness. Recent legislative efforts, including the 2021 Investment Promotion Law, the Company Law, and the Insolvency Law, have created a more business-friendly regulatory environment. Furthermore, Rwanda’s commercial courts and streamlined processes for business registration and dispute resolution set benchmarks for the region.

On environmental sustainability, the B-READY report highlights Rwanda’s leadership in integrating environmental sustainability into its business practices. Initiatives such as e-mobility and renewable energy demonstrate the country’s commitment to a green economy, positioning Rwanda as a leader in sustainable development across Africa.

Rwanda’s holistic approach to reform also prioritizes good governance, macroeconomic stability, and anti-corruption measures, all of which have contributed to its favourable rankings in the B-READY report.

The Rwanda Development Board (RDB), a government agency responsible for promoting economic development and investment, stated that this performance demonstrates the country’s sustained drive to enhance its business environment and foster a welcoming climate for investors.

Francis Gatare, CEO of the RDB, participated in the launch of the World Bank report in Washington, D.C., United States. He acknowledged the good performance and pledged to further improve the business environment. Ongoing initiatives include the digitization of the One Stop Center, upgrades to business and mortgage registration systems, and the integration of trade services under a Single Transaction Portal.

“Rwanda’s performance in the B-READY report reflects our unwavering commitment to creating a conducive environment for private sector growth and investment. These reforms are the foundation of our socioeconomic transformation, and we will continue to prioritize innovation, sustainability, and efficiency to attract investment and grow the private sector.”

According to the World Bank, the B-READY report will offer countries a roadmap to create a business climate that benefits firms, consumers, the environment, and society as a whole. The 2025 report will assess more than 100 economies, and in 2026, the coverage will expand to about 180 economies.

According to the OECD economic outlook, annual GDP growth in the United States is projected to slow down to 2.6 percent in 2024 and further down to 1.6 percent in 2025, but be cushioned by monetary policy easing.

For Euro area, the OECD said that GDP growth is projected to be 0.7 percent in 2024 and speed up to 1.3 percent in 2025, with activity supported by a recovery in real incomes and an improvement in credit availability.

Headline inflation has continued to fall this year in most countries, partly due to further declines in food price inflation and low or negative energy and goods price inflation, the organisation noted, adding that the recent steep fall in oil prices, and the ongoing easing of global food prices could place further downward pressure on headline inflation in the short-term.

“Oil prices have declined by over 10 percent since July, amid expectations for excess supply next year and market concerns about weakening oil demand growth… If oil prices remain at their current level, global headline inflation could be reduced by around 0.5 percentage points over the coming year,” the OECD explained.

According to the OECD, declining consumer price inflation has supported household spending, providing a counterbalance to the negative impact from restrictive financial conditions and the uncertainty about the ongoing Ukraine conflict and the evolving crisis in the Middle East.

Along with stable GDP growth and further disinflation, the OECD also said that real incomes would improve and less restrictive monetary policy in many economies would help underpin demand.

The recovery in real incomes could provide a stronger boost to consumer confidence and spending, and further oil price declines would hasten disinflation.

Headline inflation is projected to ease from 5.4 percent in 2024 to 3.3 percent in 2025 in the G20 economies.

He was presenting the Monetary Policy and Financial Stability Statement (MPFSS) on September 25. The latter features the economic performance for the first half of the year and provides projections for the remainder of 2024.

With this robust growth, Governor Rwangombwa emphasized that the Rwandan economy is expected to surpass the initially projected growth for the year.

“We expect our economy to perform much higher than the original 6.6 percent projection for 2024,” he stated.

According to Rwangombwa, all sectors of the economy have contributed to this growth, with the service and industrial sectors showing particularly strong double-digit increases.

Over the past five years, the service sector has grown by an average of 48.2%, the industrial sector by 24.1%, and the agriculture sector by 18.4%.

However, Rwangombwa pointed out a significant challenge: the growth is not reflected in the export sector, which has impacted Rwanda’s foreign exchange earnings.

“The only challenge we have is that this growth is not reflected in our export sectors. This impacting our foreign exchange earnings and foreign exchange market.

“This is where the government and the private sector need to do more because the economy is growing but the imbalance between imports and exports continue to widen,” he stated.

This issue is evident in the rising level of imports, which grew by 5.7% in the first half of 2024, while exports decreased by 0.9%.

In 2023, imports rose by 17.4%, and exports increased by 11.2%, highlighting the ongoing trade deficit. The widening of the trade deficit—up by 9.6% in the first half of this year—can be attributed to a drop in the prices of exported commodities, while imports continue to rise.

This trade imbalance has also contributed to the depreciation of the Rwandan franc against the US dollar. In the first half of 2024, the franc depreciated by 3.7%, which is a notable decrease compared to the 8.8% depreciation recorded during the same period last year.

Governor Rwangombwa noted that while this year’s depreciation is expected to be just above 8%, it remains higher than the historical average, driven by pressures from the trade deficit.

On a positive note, inflows from travel, tourism, and remittances continue to rise, helping to finance the trade deficit. Rwanda currently has enough reserves to cover 4.7 months of imports, with projections to end the year at 4.8 months.

Inflation stood at 4.7% in the first half of 2024 and is projected to average around 5% for the entire year.

This new factory is perceived as a crucial step in the country’s ongoing efforts to industrialize the economy and diversify its manufacturing capabilities thereby positioning herself as a regional hub in the textile and garment sector.

AC Better Limited, a company comprised of Rwandan and Chinese business owners with deep roots in China’s robust textile industry and strong ties to Rwanda, is uniquely positioned to drive this transformation.
Edward Yin, the company CEO and key figure in the Kigali operations regards the establishment of the factory as a strategic move that aligns with both Rwanda’s national goals and the broader economic vision for the region.

“Rwanda is emerging as a central hub for the modern clothing industry in East Africa,” Yin explains. “Establishing this factory is not just about producing textiles; it’s about creating an ecosystem that supports local businesses, fosters innovation, and connects Rwanda to global markets.”

The company already operates a successful warehouse and supply chain business, providing local consumers with a wide range of textile fabrics, sewing machines, and essential accessories such as buttons and zippers.
They go beyond merely supplying products, providing spare parts and repair services to ensure that clients, from tailoring companies to retailers, receive comprehensive support and high-quality products.

This will serve as a major supply center for textiles in Rwanda, significantly enhancing the availability of high-quality fabrics and related products. This will be particularly beneficial for local designers, tailors, and fashion entrepreneurs who often face challenges in sourcing materials and accessing modern equipment.

The decision to establish the factory comes at a time when Rwanda is experiencing rapid growth in its industrial landscape. With a strong emphasis on promoting local manufacturing, the government has been actively encouraging investments in sectors that have the potential to create jobs, reduce dependency on imports, and boost exports. The textile industry, identified as one of the key areas for development, is now set to receive a major boost with this new venture.

The factory is expected to not only meet local demand but also cater for the broader East African market, thereby positioning Rwanda as a key player in the regional textile industry. Shyaka Gakuba, a Rwandan shareholder in AC Better Limited has been instrumental in conceptualizing the project.

Reflecting on the journey that led to this point, Gakuba said, “The idea to establish a modern textile factory in Rwanda was conceptualized when a ban against importation of second hand clothes was adopted. We looked at this as a way of creating a more self-reliant environment in clothing production.”
He is optimistic that this will enable a thriving, competitive industry that could provide jobs, support local businesses, and reduce reliance on imported textiles.

This development has since garnered significant interest from various stakeholders in Rwanda’s textile sector such as Maximilien Kolbe Uwayo Hategekimana, co-CEO of Kuza Africa Ltd, a hub dedicated to advancing the textile and garment industry in Rwanda.

He believes that this will positively contribute to transforming Rwanda’s fashion and textile sector. “Sourcing supplies and machines can be incredibly costly particularly for designers and small businesses from low-income economies,” he notes.

“By clustering designers into one entity, we can achieve economies of scale that reduce costs and streamline the production process. Our collaboration with AC Better Limited will ensure that our members have access to the materials and equipment they need at competitive prices,” he affirms.

Hategekimana, who connects tailors, fashion designers, and other value chain stakeholders by offering education, business development services, and access to world-class equipment, believes this is a positive step in the right direction.

In reducing Rwanda’s reliance on imported textiles, the idea of any contribution towards improving the country’s trade balance, industrial landscape and economic resilience is palpable.