Rwanda – the jewel of East Africa

Rwanda is a fairly small economy that has risen to prosperity after the genocide in the 1990s.

That said, economic growth is expected to remain one of the highest in East Africa as the government looks to the domestic market to propel economic activity.

Below are key highlights of the economy in 2018:

  • ​As Rwanda draws up its long term economic strategy to reach high income status by 2050, key drivers to the growth story are focused on supportive policies towards SMEs. However, the banking sector stands reluctant to extend credit to the private sector and when they do, lending rates are usually prohibitive. This has not only stifled SME growth but it has also curtailed job creation initiatives that have rippling effects to the greater economy
  • Meanwhile, the National Bank of Rwanda plans to maintain an ‘accommodative’ monetary policy stance in the first half of this year as domestic price pressures are set to remain subdued. In the near term, there is little expectation that there would be substantial food price pressures feeding into overall inflation figures. In its last meeting of 2017, the Central bank cut its key repo rate to 5.50% and is expected to review its policy stance at the end of this first quarter.
  • The gradual depreciation in the franc has been as a result of a greater import bill vis-a-vis export proceeds. However, import substitution reforms and diversification in export goods have offered support to the local currency. Meanwhile, the Central Bank has acted directly in the FX market through exerting FX ‘controls’ that limit the supply of US dollars in the market – despite elevated demand. This has also contributed to a steady weakening bias as the local currency wanes off extreme shocks from rising dollar demand. 
  • Nevertheless, the government is expected to continue implementing policies towards narrowing the country’s trade deficit. These policies include and are not limited to exchange rate flexibility, public spending restraints, prudent monetary policy and import substitution reforms in support of local industries. Relatedly, the diversification in export products is expected to result in increased exports receipts as the domestic market enhances its competiveness in the external market.

Overall verdict?

  1. Good for investment and business opportunities.
  2. Affordable living.
  3. Could be the next tech Hub of East Africa.

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