Kigali: Rwanda is sending more exports to four of its neighbours than what it buys from there, according to new government figures released Thursday, but the general trade deficit continued to widen.

Finance Minister John Rwangombwa (R) and BNR deputy Governor Claver Gatete at the workshop (Photo: Margaret Cappa)

The results of a survey conducted by the Ministry of Commerce, the National Bank of Rwanda and the National Institute of Statistics show Rwanda has a positive trade balance with neighbouring Uganda, Burundi, Tanzania and DR Congo. 

Between May 2009 and April 2010, nearly 40.1 billion RWF in transactions was made between Rwanda and its regional trading partners. The vast DRC accounted for 63 per cent of these transactions. While Rwanda managed to export over 27 billion RWF to its four neighbouring countries, the four countries combined only exported a total collective amount of 12.3 billion RWF to Rwanda. Uganda dominated imports to Rwanda at 42.3 per cent.

Cross-border trade, mainly between Rwanda and the Democratic Republic of Congo (DRC), is largely dominated by the buying and selling of crop products and live animals.

While Rwanda imported DRC goods worth 721 billion RWF in the last year, it exported more than 7000 billion RWF to this western neighbour. The remaining trade balance of 6675 billion RWF is a major indication of Rwanda’s exporting capacity. A positive trade balance is also shared with Burundi at 384 billion RWF.

It has been the hope of government that the East African region will cherish land-locked Rwanda as a major trading post, and now, the numbers are starting prove this dream could be a reality.

“We must look at these numbers because they confirm Rwanda can be a trade hub in East Africa,” said Francois Kanimba, Governor of the National Bank of Rwanda, as the trade data was published a Monetary Policy Statement Workshop on Thursday in Kigali.

“Our main exports are doing very well,” said Kanimba. “Tea has increased in value by 25.8 per cent and coffee by 21.1 per cent.”

Tea and coffee, the traditional exports of Rwanda, are not the only products being desired internationally though. All other Rwandan exports have increased by 45.9 per cent in value this year.

“There is a long list of products that show we have diversified out export strategy,” he said.

Some of these other exports include flowers, bananas, textiles, shoes and cassava flour. Fittingly, the agricultural sector has seen a growth of 8.2 per cent this year.

Expansion in trade and exports is one of the reasons why BNR and the Minister of Finance defend Rwanda’s economic growth of seven to 10 per cent for 2010 - even amidst the IMF’s prediction of four to six per cent.

“We agree with the IMF on the nominal growth, what we disagree on is the real growth,” said John Rwangombwa , Minister of Finance, noting the difference in predictions comes from different readings of inflation.

“Look at inflation today, it’s in line with what we predicted, while theirs is much higher.”

The value of the Rwanda Franc is also stable, said BNR’s governor. Although it depreciated slightly in July, it remains competitive vis-a-vis Rwanda’s main trading partners.

With the good news of growth in exports and trade aside, the central bank’s governor said some work needs to be done internally. Banks in Rwanda are not injecting enough money into the private sector by way of loans, and interest and deposit rates are too high, said Kanimba.

“The increase [in loans] is moderate, but combined with our low inflation there’s room for further expansion,” he said. “This is a strong message to the banks to do more than they’ve been doing to distribute more money in the economy.”

The banks have their own reasons for not approving high amounts of loans or maintaing their so-called “high” rates.

“It’s a misnomer that the banks are charging high rates, we are not,” said Sanjeev Anand, managing director of BCR.

The interest rates, which hover around 24 per cent, are comparable with the region, he said.

“And yes, it makes sense for us to loan, but the issue is having the high quality applications.”

People should have access to loans they deserve, agreed James Gatera, managing director of Bank of Kigali.

“The financial risk of lending in Rwanda is high due to this culture of non-repayment,” agreed Kanimba. Still, he thinks interest rates can come down.

Perhaps the reason why high quality applications and serious borrowing isn’t happening yet is because of a lack of knowledge among Rwandans about the banking system and personal finances. The banks and the central bank need to invest more money in citizen education, said James Ndahiro, chair of the Capital Market Advisory Committee.

“We need to simplify the language and educate the people,” he said. “Many people don’t understand what we’re talking about right now so public education is necessary in this field.”

Education from the central bank is necessary and there are plans for it, said Kanimba, but the banks have to play their part too by better explaining finance questions from their clients.

The next monetary policy workshop will be in six months.