annual economic report fiscal year 2018/2019 january 2020 - ministry...
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| ANNUAL ECONOMIC REPORT i
REPUBLIC OF RWANDA
MINISTRY OF FINANCE AND
ECONOMIC PLANNING
ANNUAL ECONOMIC REPORT
FISCAL YEAR 2018/2019
January 2020
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Table of Contents EXECUTIVE SUMMARY ............................................................................................................................................ 1
1. THE INTERNATIONAL ECONOMIC AND FINANCIAL SITUATION .................................................................... 3
2. DOMESTIC ECONOMIC PERFORMANCE ...................................................................................................... 6
2.1.2. Real Sector Growth and Contributions to GDP ........................................................................................ 6
2.1.3. Growth by Expenditure Components ..................................................................................................... 8
2.1.1. Prices..................................................................................................................................................... 9
2.1.2. Labour Force Survey results ................................................................................................................. 10
2.2. Fiscal Sector ......................................................................................................................................... 11
2.2.1. Original and Revised Budget ................................................................................................................ 12
2.2.2. Domestic Revenue Performance .......................................................................................................... 12
2.2.3. External Resource Performance ........................................................................................................... 13
2.2.4. Outlays Performance ........................................................................................................................... 13
2.2.5. Capital Expenditure ............................................................................................................................. 15
2.2.6. Net Lending ......................................................................................................................................... 15
2.2.7. Deficit and Financing............................................................................................................................ 15
2.3. External Sector .................................................................................................................................... 16
2.3.1. Balance of Payments Overview ............................................................................................................ 16
2.3.2. Trade Balance ...................................................................................................................................... 17
Export of Goods ................................................................................................................................... 17
Import of Goods .................................................................................................................................. 18
2.3.3. Services, Primary and Secondary Accounts ........................................................................................... 19
2.3.4. Capital and Financial Accounts ............................................................................................................. 20
2.4. Public Debt .......................................................................................................................................... 20
2.4.1. Debt Stock Developments .................................................................................................................... 20
2.4.2. Debt Servicing...................................................................................................................................... 22
2.4.3. External Debt Sustainability Analysis (DSA)........................................................................................... 22
2.5. Monetary and Financial Sector ............................................................................................................. 23
2.5.1. Monetary Sector Developments........................................................................................................... 23
2.5.2. Interest Rate Developments................................................................................................................. 24
2.5.3. Exchange Rate Developments .............................................................................................................. 24
2.5.4. Financial Sector Developments ............................................................................................................ 25
3. ECONOMIC OUTLOOK .............................................................................................................................. 26
3.1. Real Sector................................................................................................................................................. 26
3.2. Fiscal Policy Outlook .................................................................................................................................. 27
3.3. External Sector Outlook ............................................................................................................................. 27
3.4. Debt Outlook ............................................................................................................................................. 27
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3.5. Monetary Policy and Financial Outlook ...................................................................................................... 28
4. CONCLUSION ........................................................................................................................................... 30
| ANNUAL ECONOMIC REPORT 1
EXECUTIVE SUMMARY
This Fiscal Year (FY) 2018/19 marks the second year of implementation of the 7 Years
Government Programme, the National Strategy for Transformation (NST1). In order to achieve
NST1 objectives, an average GDP growth of 9.1 percent over the period will be required.
This Annual Economic Report (AER) covers Rwanda’s Fiscal Year (FY) 2017/18. From July 2018 to
June 2019, Rwanda recorded the highest real GDP growth rate of the last 10 years, surpassing
the past-decade-average growth rate by almost 3 percentage points. Rwanda’s growth is taking
place in a subdued, yet partly heterogeneous, global environment, particularly in sub-Saharan
Africa where some countries are showing robust growth performance above 6 percent on
average, while growth projections in the majority of countries remains lackluster.
In Rwanda, growth during the period under review stood at 9.5 percent. This good performance
was mainly driven by the industry and services sectors. The industry sector saw its growth
doubled from 8 percent in FY 2017/18 to 16 percent in FY 2018/19 due to increased activities in
construction and manufacturing, growing by 25 percent and 12 percent respectively. The services
sector grew by 9 percent, boosted mainly by air transport (Rwandair). In the near-term, the main
drivers to growth will remain construction and manufacturing, reflecting ongoing construction of
capital projects and “Made in Rwanda” policy; and as well as trade and transport services
following import growth.
Consumer prices remained generally low, with headline inflation averaging at around 0.8 percent
in FY 2018/19, relative to 2.3 percent recorded in FY2017/18. While inflation is anticipated to
increase, it is expected to be contained at around 5 percent in the medium-term.
In FY 2018/19, fiscal performance was backed by strong domestic economic performance. On
February 11, 2019, Parliament approved a revised budget totaling FRW 2,585.2 billion which was
FRW 141.7 billion higher than the original budget approved in June 2018. The period under
review showed a good performance for total revenues (both tax and non-tax) relative to FY
2017/18. Despite a better-than-expected tax revenue collection from the resource side, grant
and loan disbursements during the period were slowed particularly in the last quarter of FY
2018/19. On the spending side, the pace of finalizing all procedures required for spending
affected the level of expenditures. However, total spending under net lending for the fiscal year
2018/19 at end June 2019 exceeded the projected amount, mainly due to additional transfer
payments made to Rwandair to meet urgent obligations.
During FY 2018/19, total actual capital expenditure amounted to 1,071.7 billion FRW, compared
to 850.2 billion FRW recorded in FY2017/18. This was driven by the implementation of externally
financed projects, offsetting lower-than-anticipated spending in domestic capital financing. A
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large portion of projects implemented during the fiscal year 2018/19 in the case of capital
expenditure reflects NST1 priorities.
At the end of the fiscal year, total revenue and grants registered 2,065 billion FRW, reflecting an
increase of 3.8 billion FRW compared to the revised budget projection. Total expenditure and net
lending registered 2,611.5 billion FRW, 92.7 billion FRW above projections. On payment order
basis, the deficit for FY 2018/19 amounted 547.7 billion FRW, equivalent to 6.4 percent of GDP.
On cash basis, the deficit was 491.4 billion FRW; the deficit was financed with net foreign
borrowing (448.3 billion FRW) and domestic financing (43 billion FRW). Regarding the medium
term period, total revenue and grants are projected to be 2,250.4 billion FRW in 2019/20, 2,551
billion FRW and 2,847.6 billion FRW in 2020/21 and 2021/22 respectively. Tax to GDP is projected
to be 16.4 in 2019/20 and increase by 0.2 percent of GDP every fiscal year that will follow. The
non-debt creating fiscal deficit on a five years rolling average basis, is 5.5 percent of GDP in
2019/20 and 2020/21, declining to 5.3 percent of GDP in 2021/22, thus respecting the fiscal rule
under the Policy Coordination Instrument (PCI) program with the IMF.
During FY 2018/19, the overall balance of payments had a surplus of US$ 58.5 million, which is
lower than the surplus of US$ 135.5 million at the end of the previous FY 2017/18. The decrease
was due to the decline in financial account balance as a result of shortfall/delays in disbursement
of grants and loans in the first half of 2019. Despite an improvement of capital accounts by 32.9
percent, the current account has deteriorated by 7.4 percent, due to a high increase in import
for construction activities in the country. Export growth was affected by a drop in price observed
in the international market for most of our traditional exports. The deterioration of the current
account balance, which stood at 10.6 percent of GDP in FY 2018/19 compared to 7.7 percent of
GDP in the previous fiscal year 2017/18 was specifically due to the increase of the external
imbalance of goods and services (by +12 percent); which represents around a 56 percent share
of the current account. In summary, Trade balance has deteriorated by 25.5 percent, import
growth outweighing export growth. Positive export trends and more modest import growth are
expected to support the continued narrowing of the current account deficit to around 9.9 percent
of GDP in 2020 and 7.3 percent in 2023 in addition to improving external buffers.
The BNR’s monetary policy stance remained accommodative during the period. Given that both
inflationary and exchange rate pressures were projected to remain moderate in FY 2018/19, the
key repo rate, which was reduced to 5.5 percent in FY 2017/18 from 6.0 percent in FY2016/17,
persisted throughout the FY2018/19 period. It was further reduced to 5.0 percent in May 2019
to improve the overall financial market conditions and support financing of the economy by the
banking sector. In FY2019/20, monetary policy will focus on ensuring a stable macroeconomic
and financial environment. Over the policy horizon, inflation is expected to remain within the
benchmark band of the NBR of 5±3 percent.
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The current impressive performance of the Rwandan economy over the past decade, particularly
in FY2018/19, provides a solid basis for sound and sustainable economic policy management in
both the medium and long term.
1. THE INTERNATIONAL ECONOMIC AND FINANCIAL SITUATION
Global economic activity is tilting downward in 2019 and 2020 after strong and steady growth
in 2017 and 2018. Growth projections for many regions are declining in 2019 except for sub-
Saharan Africa where growth is projected to remain flat this year. This harmonized slowdown for
nearly 90 percent of countries around the world signals the gathering of factors affecting the
global economy.
Table 1: World and Regional Real GDP Growth (%)
Real GDP Growth 2016 2017 2018 2019 Proj. 2020 Proj.
World 3.2 3.8 3.6 3.0 3.4
Advanced Economies 1.7 2.4 2.3 1.7 1.7
Euro Area 1.8 2.4 1.9 1.2 1.4
United States 1.5 2.2 2.9 2.4 2.1
Emerging Markets and Developing Economies 4.3 4.8 4.5 3.9 4.6
Developing Asia 6.4 6.6 6.4 5.9 6.0
China 6.7 6.8 6.6 6.1 5.8
India 7.1 7.2 6.8 6.1 7.0
Latin America and Caribbean -0.9 1.2 1.0 0.2 1.8
Middle East and Centr. Asia incl. N. Africa 5.0 2.3 1.9 0.9 2.9
Sub-Saharan Africa 1.4 2.9 3.2 3.2 3.6
Source: WEO, October 2019
Global growth is projected at 3.0 percent for 2019, reflecting a 0.3 percent downward revision
from an earlier forecast in April. It is estimated to grow in 2020 at the rate of 3.4 percent.
However, unresolved trade tensions between the United States and China are softening global
economic activity and pointing to a more insecure economic environment in the near and
medium terms. The Europe area has slowed due in part to political tensions that affected
consumption spending in France, fiscal policy challenges in Italy, and growing uncertainties
surrounding no-deal Brexit in the United Kingdom. In sub-Saharan Africa, economic performance
is predictably heterogeneous, where some countries are expected to experience robust growth
above 6 percent this year, such as Rwanda and Ethiopia, but growth projections for a majority of
the countries in the region remain lackluster.
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Risks to the global economy is skewed towards the downside. They include swelling trade and
technology tensions that have drained business confidence and affected the global
manufacturing industry; structural issues such as aging demographics and low productivity
growth in advanced economies; sudden shift in global risk appetite; rise of geopolitical tensions;
and escalating disinflationary pressures that make adverse shocks more pervasive. However, the
recent trade discussion at the G20 Summit could ease tensions but requires strong agreeable
commitment to address deeper frustrations surrounding the rules-based multilateral trading
system and easing financial market conditions.
1.1. World Trade
Global trade volumes have slowed significantly, and is projected far below the averaged crisis
levels following the emergence of US-China trade war, which resulted in tariff actions on a wide
range of products in 2018 and in the first half of 2019. The outlook seems promising in 2020,
growing at 3.2 percent, but still below 2018 performance level. The projected growth in the year
ahead is relatively more uncertain since it relies heavily on the presumption that the current
stressed emerging market and developing economies will stabilize in the near term, including
progress toward settling major trade disputes and other related trade policy issues.
Table 2: World Trade Volume (Goods and Services, yearly % change)
Pre-crisis
1999-2008
Post-crisis
2009-2014 2018
2019
proj.
2020
proj.
World Trade Volume 6.6 3.2 3.6 1.1 3.2
Imports
Advanced Economies 6.2 2.1 3.0 1.2 2.7
Emerging Markets and Developing Countries 8.9 5.3 5.1 0.7 4.3
Exports
Advanced Economies 5.8 2.8 3.1 0.9 2.5
Emerging Market and Developing Countries 8.8 4.3 3.9 1.9 4.1
Source: WEO, October 2019
1.2. Global and Regional Inflation
Global inflation outlook for 2019 is mixed. It is projected to decline in both advanced economies
and sub-Saharan Africa, but expected to move upward slightly in emerging markets and more in
Latin American economies. This reflects the prospect for growth in some regions and the impact
of commodity price decline, such as energy prices, which seem to have muted prices across
advanced economies. In emerging markets and developing economies, a temporary increase in
| ANNUAL ECONOMIC REPORT 5
VAT in Russia, for instance, and a strong consumer demand in India have contributed to inflation
growth. Core inflation, excluding food and energy, still remains subdued and below central banks’
targets in most advanced economies despite a reasonable pickup in 2017 and 2018. In most
Figure 1: World and Regional Consumer Price Inflation Rates (percent)
Source: WEO, October 2019
*Projection
emerging market and developing economies, core inflation is still below recent year average,
while for some countries, particularly in sub-Saharan Africa, exchange rate depreciations have
been translated into higher domestic price increases.
Consumer prices eased in all EAC countries for the FY 2018/19. Inflation rate in EAC averaged 1.7
percent by end of 2018/19 compared to 4.5 percent in the previous fiscal year, as prices have
fallen significantly for food and non-alcoholic beverages. Headline inflation fluctuated
significantly across countries. For FY2018/19, inflation in Rwanda stabilized at around 0.8 percent
while Burundi experienced negative inflation in the same period. On average, Kenya recorded
the largest inflation rate in FY2018/19, followed by Tanzania and Uganda respectively.
Figure 2: EAC Inflation Rates (percent)
Source: EAC Countries Statistics
0.0
3.0
6.0
9.0
12.0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019*
CP
I (%
)
Advanced economiesMajor advanced economies (G7)Emerging market and developing economiesEmerging and developing AsiaLatin America and the CaribbeanSub-Saharan Africa
-5.3
0.0
5.3
10.5
15.8
FY2016/17 FY2017/18 FY2018/19
CP
I (%
)
Uganda
Kenya
Tanzania
Rwanda
Burundi
| ANNUAL ECONOMIC REPORT 6
1.3. Global Financial Markets Developments
Global financial conditions are relatively easing since the April 2019 outlook, although subject to
risk underpricing which could further facilitate the buildup of financial vulnerabilities. The current
outlook relies heavily on two main issues: the impact of trade tensions on lessening economic
conditions and the implication of these tensions on monetary policy stance. Monetary policy shift
by central banks is expected to improve the overall global financial market conditions in the near
term where policymakers now seem to have favored more accommodative policy rates amid
disinflationary spirals. Low inflation in the United States is strengthening the case for a Fed
interest rate cut, while the European Central Bank, China, and other emerging market economies
are keeping interest rates at its current low levels with more cautious view and near-term
forward guidance. These anticipated monetary policy paths across key regions are reviving
investors’ sentiments as markets regain their momentum. The global share prices have partly
recovered in the middle half of 2019 capturing the lost momentum in May 2019 as interest rates
continue to decline across a broad swath of economies. The US dollar has appreciated in real
effective terms while the Euro depreciated about 3 percent over this period following sharp
exchange rate depreciation in emerging markets.
2. DOMESTIC ECONOMIC PERFORMANCE
2.1. Real Sector
2.1.1. Economic Growth Performance
During the fiscal year 2018/19, the Rwandan Economy recorded the highest growth in the last 10
years with 9.5 percent, almost 3 percentage points higher than the 10-years' average. This was
mainly driven by the industry sector, which saw its growth doubled from 8 percent in 2017/18 to
16 percent in 2018/19 thanks to construction and manufacturing boost, which saw 25 percent
and 12 percent growth respectively in 2018/19. The services sector grew by 9 percent and
agriculture by 5 percent. GDP per capita in 2018 stood at 787 $US compared to 774 $US in 2017.
2.1.2. Real Sector Growth and Contributions to GDP
During the Fiscal year 2018/19, GDP grew by 9.5 percent from 8.9 percent the previous fiscal
year. The Industry sector led the way by a considerable distance, expanding the most in real
terms, registering its highest growth of the last 6 years of 16 percent. This performance was
followed by a 9 percent and 5 percent growth of the services and agriculture sectors, respectively.
Remaining the largest share of GDP with 48 percent, the Services sector grew by 9 percent in
2018/19. Mostly driven by trade and transport, which grew by 14 percent in 2018/19 thanks to
| ANNUAL ECONOMIC REPORT 7
Figure 3: Real sector Growth (2013/2014 to 2018/2019)
Source: National Institute of Statistics of Rwanda
wholesale and retail trade (+14 percent). Other services grew by 8 percent, mostly driven by
financial services, Real Estate and Professional, Scientific and Technical activities, which grew
respectively by 12 percent, 5 percent and 16 percent in 2018/19 from 10 percent, 3 percent and
6 percent in 2017/18. On the overall, the sector contributed 4.5 percentage point. Two sub-
categories which improved in their contributions to the sector’s overall contribution to the real
expansion of the economy were the real estate sector and the professional services sector. These
two sub-categories contributed 0.4 and 0.5 percentage points, respectively, compared to their
2017-2018 contributions of 0.2 for each.
With a share of 17 percent of GDP, Industry grew by 16 percent. Contributing significantly to this
was a 25 percent growth in Construction services and a 12 percent growth in Manufacturing
services, driven mainly by construction related manufacturing: non-metallic, +25 percent; Metal
products, +35 percent; Wood, +26 percent). The strong expansion in real industrial output was
manifested in a solid 2.9 percentage point contribution, a figure which is more than double the
sector’s contribution for fiscal year 2017-2018. There was a stronger contribution from
construction services of 2.0 percentage point, a figure which dwarfs the 0.3 percentage point
contribution registered in 2017-2018, significantly improved the industrial sector’s overall
performance of 2.9 percentage point. As expected Mining and quarrying slowed down due to a
drop in commodity prices and stood at 6 percent in 2018/19 compared to 20 percent in 2017/18;
contributing a 0.4 percentage point less than the 0.6 percentage point registered for fiscal year
2017-2018.
The agriculture sector, the economy’s second largest sector with a 28 percent share, grew by 5
percent in 2018/19 from 8 percent in the previous fiscal year. This slowdown in growth was
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
Agriculture Industry Services GDP
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Table 3: Real sector growth by sector (FY2016/2017 to FY2018/2019)
Contribution Growth Rate (percent)
Growth Rate (percent) Shares of Nominal GDP
(percent)
2016-
17 2017-
18 2018-
19 2016-
17 2017-
18 2018-
19 2016-
17 2017-
18 2018-
19
GDP 3.4 8.9 9.5 3.4 8.9 9.5 100.0 100.0 100.0
AGRICULTURE 0.9 2.2 1.2 3.0 8.0 5.0 31.0 31.0 28.0
Food crops 0.4 1.3 0.5 3.0 8.0 3.0 20.0 18.0 15.0
Export crops -0.1 0.3 0.0 -5.0 14.0 -1.0 2.0 2.0 2.0
Livestock & livestock products 0.4 0.4 0.5 11.0 12.0 14.0 3.0 4.0 4.0
INDUSTRY 0.4 1.4 2.9 2.0 8.0 16.0 16.0 16.0 17.0
Mining & Quarrying 0.2 0.6 0.2 7.0 20.0 6.0 2.0 2.0 2.0
Manufacturing 0.4 0.5 0.7 6.0 8.0 12.0 6.0 6.0 6.0
Construction -0.2 0.3 2.0 -3.0 4.0 25.0 6.0 6.0 7.0
SERVICES 2.7 4.8 4.5 5.0 10.0 9.0 47.0 47.0 48.0
Wholesale & retail trade -0.3 1.1 1.1 -5.0 14.0 14.0 7.0 7.0 7.0
Transport 0.2 0.8 0.7 4.0 19.0 15.0 4.0 4.0 5.0
Real estate 0.6 0.2 0.4 8.0 3.0 5.0 8.0 8.0 8.0
Professional services 0.5 0.2 0.5 16.0 6.0 16.0 3.0 3.0 3.0
Source: National Institute of Statistics of Rwanda
mainly due to a negative growth of export crops of 1 percent in 2018/19, explained by a shrink
in Tea, Sugarcane and Pyrethrum (-6 percent, -55 percent, -27 percent respectively), although
Coffee grew by 6 percent. Food crops grew by 3 percent in 2018/19 compared to 8 percent in
2017/18, the slowdown was due to lower performance in the production of season A. Livestock
grew by 14 percent, Forestry by 5 percent and Fishery by 3 percent. This meant that the sector’s
contribution fell from 2.2 percentage point in fiscal year 2017-2018 to 1.2 percentage point in
2018-2019. Improved contribution from livestock products was saddled by declining contribution
from food crops and export crops, compared to the past fiscal year.
2.1.3. Growth by Expenditure Components
On the demand side, overall GDP growth was driven by a consecutive high growth of Gross
Capital formation, which grew by 26 percent in 2018/19 from 23 percent in the last year, and
Government consumption with a growth rate of 23 percent in 2018/19 from 3 percent in the
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Table 4: GDP contribution by selected expenditure components
Components contribution to growth (in
percentage points)
2017-18 2018-19
Growth rates of Real GDP 8.9 9.5
Total final consumption expenditure 1.8 8.3
O/w Households and NGOs 1.5 4.5
Gross fixed capital formation 5.3 6.8
O/w Construction 0.6 4.3
Exports of goods & services 5.1 0.2
Imports of goods & services -3.5 -5.6
previous fiscal year. The trend in the Gross Capital Formation is linked to the upward trend in
construction, which grew by 25 percent in 2018/19. These spectacular growth rates meant strong
growth contributions of 7.4 percentage points and 5.6 percentage points from gross capital
formation and total final consumption expenditure categories, respectively. These contributions
represent increases of 5.6 percentage points and 1.2 percentage points of total final consumption
expenditure and gross capital formation, respectively, when compared to the previous year. The
expansion of these expenditure categories were fueled substantially by solid performances from
some of their sub-components. Specifically, a 4.5 percentage points contribution from final
household and NGOs expenditure, a component of the total final consumption category; and a
4.3 percentage points contribution from construction investment, a component of the gross fixed
capital formation category, are noteworthy. The contributions of these components are all
significantly higher than the 1.5 and 0.6 percentage points contribution registered for 2017-2018.
Notwithstanding, imports of goods and services, a component of the resource balance category
contributed 5.6 percentage points compared to the 3.5 percentage points registered for 2017-
2018. This growth in imports meant that the current account deficit widened by an additional 5
percent compared to its 2017-2018 figure of 11 percent.
2.1.1. Prices
The annual inflation remained low, with the headline inflation averaging 0.8 percent over
2018/19 from 2.3 percent the previous year. Lower inflation was mainly explained by inflation of
food (-3.9 percent compared to 2 percent); clothing & footwear costs (3.3 percent compared to
4.3 percent), housing and utilities (1.9 percent compared to 2.7 percent), recreation and culture
(-0.9 percent compared to 3.9 percent), health (0.2 percent compared to 3.5 percent). Meantime,
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Figure 4: Inflation for key items in annual average rates
Source: National Institute of Statistics of Rwanda
inflation was higher for transport (7.8 percent compared to 3.9 percent), education (1.6 percent
compared to 0.5 percent). In contrast, prices for alcoholic beverages and tobacco were stable
(averaging 5.8 percent for the last two years). Energy and transport prices increased mainly due
to the upward trend in international oil prices.
Domestic goods' inflation declined considerably in the FY 2018/19 to reach 0.1 percent from 1.6
percent for the fiscal year 2018/19, mainly due to good harvest of season A2019. Imported
inflation averaged to 3.3 percent in 2018/19 from 4.5 percent in the previous fiscal year mainly
due to food and non-alcoholic beverages. Inflation for key items on annual change eased at 0.9
percent in June 2019 compared to 2.9 percent in June 2018.
2.1.2. Labour Force Survey results
According to the NISR survey results, among the 6,966,096 persons aged 16 years old and above,
living in private households, about 3,788,996 persons, representing 54.2 percent were in the
labour force, either employed (3,207,336) or unemployed (571,660). The remaining 3,187,100
persons were outside the labour force including some 1,703,122 persons engaged wholly or
mostly in subsistence foodstuff production, not classified as employment according to the new
international standards on statistics of work, employment and labour underutilization.
2.3%
0.8%
-3.9%
5.8% 5.8%
4.3%
3.3%
2.7%
1.9%
3.5%
7.8%
3.9%
-0.9%
0.5%
1.6%
-0.6%
2.7%
1.7%
-4.0%
8.0%
FY 18/19 July-June FY 17/18 July-June
GENERAL INDEX (CPI)
Food and non-alcoholic beverages
Alcoholic beverages and tobacco
Clothing and footwear
Housing, water, electricity, gas andother fuelsFurnishing, household equipmentand routine household maintenanceHealth
Transport
Communication
Recreation and culture
Education
Restaurants and hotels
Miscellaneous goods and services
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Table 5: Rwanda Labour force survey 2018: Summary labour force indicators
Working age population 16 years old and over
6,966,096 persons
Outside the labour force (Not
employed nor unemployed)
3,187,100 persons
Labour force (The sum of employed and unemployed)
3,788,996 persons
Labour force participation rate: 54.2%
Primary or below: 81.0% Employed
(All who worked for pay or profit)
3,207,336 persons
Employment to population ratio: 46.0%
Unemployed
(All not employed but seeking and
available to work for pay or profit)
571,660 persons
Unemployment rate: 15.1%
Secondary:18.0%
Tertiary: 1.0%
Others
outside the
labour force
46.6%
Subsistence
foodstuff
producers
53.4%
Agriculture
excluding
subsistence
foodstuff
production
39.5%
Industry
18.8% Services
41.7 % Primary
education
or below
68.8%
Secondary
education
23.9%
Tertiary
education
7.3%
Supplied weekly labour: 107 million hours
Source: LFS 2018, NISR
The annual unemployment rate was 15.1 percent, indicating that roughly for every seven people
in the labour force, there was one person unemployed.
2.2. Fiscal Sector
The fiscal performance for FY 2018/19 was affected by the general domestic macroeconomic
performance which impacted the revenue collection performance as well as donor budget
support disbursements, both of which determined the accrual of resources for spending
during that period. On the spending side, the pace of finalizing all procedures required for
spending affected the level of expenditures also during the period under review.
In the last quarter of the fiscal year 2018/19, there were some delays in the disbursement of
external budget support funds. As a result, there was a slow-down in the implementation of
the major expenditure items excluding spending on Peace Keeping Operations and a portion
of the additional spending projected in April 2019 that was not realized.
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Table 6: Revenue performance in 2018/2019 (in billion FRW)
Government Operations Billion FRW FY 2017/18 FY 2018/19 FY 2018/19
Act. Revised Budget Prov. Act.
Domestic revenue 1,461.5 1,635.8 1,670.2
Tax revenue 1,252.9 1,396.9 1,418.8
Direct taxes 538.7 602.6 617.1
Taxes on goods and services 616.1 684.9 690.0
Taxes on international trade 98.1 109.4 111.7
Non-tax revenue 208.6 238.9 251.4
of which PKO 150.1 160.6 151.0
Source: MINECOFIN
2.2.1. Original and Revised Budget
On February 11, 2019, Parliament approved a revised budget totaling FRW 2,585.2 billion which
was FRW 141.7 billion higher than the original budget approved in June 2018. In economic
classification terms, the revised budget projected total revenue and grants at FRW 2,061.2 billion
and total expenditure and net lending at FRW 2,518.8 billion. The revised budget was to end with
an overall cash deficit of FRW 484.9 billion which was to be financed with total net external loans
of FRW 435.7 billion and total net domestic borrowing of FRW 49.2 billion.
In March 2019, with the IMF mission for the fiscal year 2018/19 macro-economic framework
(including the budget framework) review, an additional amount of revenue was projected as well
as requests for additional spending from main priority areas that were recognized. The estimates
of domestic revenue and total expenditure and net lending were raised accordingly, especially
for the January- June 2019 period. Total revenue and grants estimates become FRW 2,074 billion,
FRW 12.8 billion higher compared to FRW 2,061.2 billion that was in the revised budget. In the
case of total expenditure and net lending there was an increase of FRW 31.4 billion which raised
the revised budget figure from FRW 2,518.8 billion to FRW 2,550.2 billion, where changes
affected mainly domestically financed capital expenditures and net lending (export promotion).
As a result, the 2018/19 budget agreed with IMF team in April 2019 was projected to end with
an overall cash deficit of FRW 503.5 billion (FRW 18.9 billion) higher compared with the FRW
484.9 billion agreed by Parliament in the revised budget for the FY 2018/19.
2.2.2. Domestic Revenue Performance
For the revised budget of the fiscal year 2018/19, FRW 1,635.8 billion was estimated for domestic
revenue and FRW 1,670.2 billion was collected with FRW 34.4 billion excess. For tax revenue,
| ANNUAL ECONOMIC REPORT 13
Table 7: External Resource Performance for FY2018/19
Government Operations Billion FRW FY 2017/18 FY 2018/19 FY 2018/19
Act. Revised Budget Prov. Act.
Total external resources 740.8 889.7 871.8
Total Grants 358.9 425.4 394.8
Budgetary grants 190.2 192.3 161.7
Capital grants 168.7 233.1 233.1
Projects 168.7 233.1 233.1
Total loans 381.9 464.3 477.0
Budgetary loans 211.5 295.1 262.0
Project loans 170.4 169.2 214.9
Source: MINECOFIN
mainly direct taxes, tax on goods and services contributed to the good performance of domestic
taxes, which increased by FRW 21.9 billion, from FRW 1,396.9 billion projected to FRW 1,418.8
billion. Under direct taxes, the main contributor to the excess was PAYE, driven by the increase
in employment of some registered companies in the service sector including financial sector,
offered bonuses, increase in wages/salaries and profit taxes. For the case of tax on goods and
services, both domestic and import VAT registered a good performance. With regard to Non-tax
revenue, an additional FRW 12.5 billion was collected, thanks to improved collections from other
administrative fees and charges which more than offset the shortfall in PKO reimbursements.
2.2.3. External Resource Performance
On the external funds side, both loans and grants registered a shortfall of FRW 17.9 billion, from
FRW 889.7 billion estimated to FRW 871.8 billion disbursed, as recorded based on actual
provisional data. This shortfall resulted from lower than anticipated disbursement of budgetary
grants and the draw-down of budgetary loans, while capital grants and project loans were on
track. However, project loans total drawdown amounts FRW 214.9 billion; which is FRW 45.7
billion higher than the FRW 169.2 billion projected in the revised budget. A table below is showing
provisional actual data and revised budget projection to illustrate where the shortfall came from.
2.2.4. Outlays Performance
Based on provisional data, the outlays profile for the fiscal year 2018/19 registered a mixed
picture, where the FRW 2,611.5 billion registered was higher by 92.7 billion FRW compared to
the projected FRW 2,518.8 in the revised budget.’ With this record, recurrent, capital and net
| ANNUAL ECONOMIC REPORT 14
Table 8: Expenditure performance
Government Operations Billion FRW FY 2017/18 FY 2018/19 FY 2018/19
Act. Revised Budget Prov. Act.
Total expenditure and net lending 2,187.5 2,518.8 2,611.5
Current expenditure 1,177.3 1,301.2 1,343.4
Wages and salaries 324.3 367.5 366.2
Purchases of goods and services 216.3 230.9 229.9
Interest payments 91.6 103.1 102.5
Domestic Int (paid) 48.9 55.4 54.6
External Int (due) 42.7 47.6 47.9
Transfers 363.3 398.7 407.2
Exceptional social expenditure 181.8 201.1 237.7
Capital expenditure 850.2 1,027.6 1,071.7
Domestic 463.2 625.3 623.7
Foreign 387.1 402.3 448.0
Net lending 160.0 190.0 196.3
Source: MINECOFIN
lending spending were reported to be higher than projected and recurrent spending exceeded
its projected amount of 1,301.2 billion FRW by 42.2 billion FRW. Capital and net lending also
registered 50.4 billion FRW higher compared to the projected amount of 1,217.6 billion FRW in
the revised budget.
Wages and Salaries: total spending on wages and salaries for the fiscal year 2018/19 was
FRW 366.2 billion, which was lower compared to the revised budget projection of FRW 367.5
billion by FRW 1.3 billion. Delayed payment of some allowances accounted for this small
shortfall under this category.
Goods and Services: at end June 2019, spending under purchase of goods and services registered
FRW 299.9 billion for the fiscal year 2018/19. This figure was only 1 billion RWF lower than the
revised budget figure of 230.9 billion FRW. Delayed expenditure regarding technical assistance
remuneration accounted for this small shortfall in spending.
Interest payment: the fiscal year 2018/19 put total interest payments at FRW 102.5 billion which
is only marginally lower than the revised estimate of FRW 103.1 billion. The small shortfall
registered under this category came mainly from domestic interest payments which were lower
by FRW 0.8 billion.
| ANNUAL ECONOMIC REPORT 15
Transfers: at end June 2019, total spending under Transfers and Subsidies amounted to FRW
407.2 billion. This figure was 8.5 billion FRW higher than the revised budget amount of 398.7
billion FRW.
Exceptional Expenditure: at end of the fiscal year in June 2019, spending under this category had
registered at FRW 237.7 billion. This end of the fiscal year’s figure was FRW 36.6 billion higher
than the amount of FRW 201.1 billion estimated for the fiscal year under review. PKO front
loading is the main reason for this excess spending.
2.2.5. Capital Expenditure
With regards to capital expenditure, in the revised budget, FRW 1,027.6 billion was projected and
provisional actual data showed that FRW 1,071.7 billion was recorded with the excess of 44.1
billion FRW mainly coming from the externally financed part while lower than projected spending
under the domestically financed portion recorded a shortfall of 1.6 billion FRW. Some project
funded by Global Fund grants were responsible for the small shortfall in spending. A large portion
of projects implemented during the fiscal year 2018/19 in the case of capital expenditure reflects
NST1 priorities.
2.2.6. Net Lending
Total spending under net lending for the fiscal year 2018/19 at end June 2019 amounted to
196.3 billion FRW and exceeded the estimated amount of 190 billion FRW for the period by
6.3 billion FRW. Additional transfer payments to Rwandair to meet urgent obligations caused
this small excess spending, as the company has expanded its operations after acquisition of
some additional aircraft.
2.2.7. Deficit and Financing
The actual data shows an excess draw-down of project loans of 45.7 billion FRW and the
corresponding increase in foreign capital spending is one of the main reasons of the increase in
the overall payment order deficit from 457.7 billion FRW in the revised budget to 547.6 billion
FRW or 6.4 percent of GDP. Overall cash deficit was higher from 484.9 billion FRW in the revised
budget to 491.4 billion FRW recorded as provisional actual. The actual net domestic financing
portion was at 43 billion FRW compared to 49.2 billion FRW projected while the actual net foreign
financing portion was 448.3 billion FRW higher than the 435.7 billion FRW projected and the
excess reflects the revised accelerated draw-down of project loans. Due to the fact that some of
the payment orders of suppliers and contractors could not have been paid before the close of
the fiscal year, Government attempted to solve it with an increase in the sale of Government
securities to the non- bank sector of the economy with net sales of 66.9 billion FRW.
| ANNUAL ECONOMIC REPORT 16
Table 9: Budget financing for FY 2018/19
Government Operations Billion FRW FY 2017/18 FY 2018/19 FY 2018/19
Act. Revised Budget Prov. Act.
Financing 392.2 484.9 491.4
Foreign financing (net) 356.0 435.7 448.3
Drawings 381.8 464.3 477.0
Budgetary loan 211.5 295.1 262.0
Project loans 170.4 169.2 214.9
Amortization (due) -25.8 -28.6 -28.7
Domestic financing 36.2 49.2 43.0
Banking system (Monetary Survey) 48.8 49.2 -12.8
Non-bank (Net) -5.9 0.0 66.9
Source: MINECOFIN
2.3. External Sector
2.3.1. Balance of Payments Overview
During FY 2018/19, the overall balance of payments had a surplus of US$ 58.5 million, a decline
from a surplus of US$135.5 million at the end of the FY 2017/18. This was due to a decline in the
financial account, explained by a shortfall/delay in disbursement of grants in the first half of
2019. Despite an improvement of capital accounts by 32.9 percent, the current account deficit
expanded by 7.4 percent. In percent of GDP, the current account balance deteriorated from 7.7
percent of GDP in FY 17/18 to 10.6 percent of GDP in FY 2018/19 due to an increase in imports
in line with the construction activities in the country, and an export growth affected by a drop
in international prices for almost of our traditional export.
Specifically, the deterioration of the current account balance in FY 2018/19 compared to the
previous FY 2017/18 was due to the increase of external imbalance of goods and services by
(+12 percent); which has a 56 percent share in the current account. The trade balance has
deteriorated by 25.5 percent. The secondary income net increased by 4.8 percent, lower than
the 23.6 percent increase recorded in FY 2017/18.
2.1.1. Trade Balance
In 2018/19, the trade balance has deteriorated by 25.5 percent, to US$ -1,035.9 million from
US$ -825.6 million in the previous FY 2017/18. This was due to an increase in import value of
| ANNUAL ECONOMIC REPORT 17
Table 10 Summary of Balance of Payments for FY 2018/19 value (million US$)
FY 2017/2018 FY 2018/2019 % change
A. Current Account - 800.8 - 860.4 7.4%
Balance on goods and services - 1,058.4 - 1,188.0 12.2%
Goods (Trade Balance) - 825.6 - 1,035.9 25.5%
Exports f.o.b. 1,152.0 1,162.4 0.9%
Of which: coffee 69.4 67.8 -2.2%
tea 87.9 83.6 -5.0%
Imports f.o.b. 1,977.6 2,198.2 11.2%
Primary income (net) = Income in BPM5 -348.9 -308.3 -11.7%
Secondary income (net) = Transfers in BPM5 606.6 635.9 4.8%
B. Capital Account 199.0 264.4 32.9% C. Financial Account: Net lending(+)/ net borrowing (-) -682.3 -641.3 -6.0%
Overall balance 135.4 58.5 -56.8%
Source: BNR Statistics Department
11.2 percent against the slight increase of export value of 0.9 percent recorded in 18/19
compared to the previous year 17/18. According to the export coverage of imports, it stood at
52.9 percent in 18/19 from 58.3 percent in the previous year.
Services performed well as the deficit has decreased by 36.8 percent. Service debit (import) has
decreased by 0.3 percent against the increase of service credit (export) of 8.7 percent explained
by an increase in transport credit (export) of 22.3 percent which outweigh the increase in
transport debit (import) of 5.7 percent, increase in travel credit (export) of 7.4 which was higher
than the increase in travel debit (import) of 2.4 percent and increase in other services credit
(export) of 9.1 percent against the decline in other services debit (import) of 10.8 percent.
Export of Goods
In 2018/19, export of goods has increased slightly by 0.9 percent in value, to USD 1,162.4 million
from USD 1,152.0 million recorded in 2017/18. This is a minor increase compared to the 37.0
percent increase recorded in 2017/18. This was especially due to the run-down performance of
Minerals (3ts) (-16.3 percent) in value, tea (-5.0 percent) and coffee (-2.2 percent) affected by
the drop in international commodity prices. This drop in international prices affected the volume
of minerals (3Ts) specifically by (-7.9 percent). Notwithstanding on this, in 2018/19 other ordinary
products have performed well as they increased by (+162 percent) in value and (+79.2 percent)
in volume compared to the previous FY. Re-export has increased by 10.4 percent, especially due
to the high demand from neighboring countries Burundi and DRC that led to an increase in
volume of 31.9 percent.
| ANNUAL ECONOMIC REPORT 18
Table 11: Trade balance in volume and value (million US$)
2017/18 2018/19 Change %
Value Volume Value Volume Value Volume
Exports 1,152.0 689,202 1,162.4 1,024,202 0.9% 49%
Coffee 69.4 20,353 67.8 21,153 -2.2% 3.9%
Tea 87.9 27,784 83.6 30,881 -4.9% 11.1%
Minerals (3Ts) 150.1 8,661 125.6 7,979 -16.3% -7.9%
Other Products 151.5 274,721 397.6 492,299 162% 79.2%
Re-export 322.7 357,682 356.2 471,889 10.4% 31.9%
Imports 1,977.6 2,263,072 2,198.2 2,296,555 11.2% 1.5%
Consumer goods 758 859,311 778.1 775,789 2.7% -9.7%
Capital goods 623.1 65,020 809.4 88,874 29.9% 36.7%
Intermediate goods 628.8 981,870 733.7 1,046,126 16.7% 6.5%
Energy 279.1 356,872 315.4 386,153 13.0% 8.2%
Trade Deficit 825.6 1,573,870 1,035.9 1,378,188 25.5% -12%
Source: BNR Statistics Department
During the FY 2018/19, the performance of coffee was not good as the high season (July-
November) in this sector, was affected by a drop in international commodity prices until the first
half of 2019. As a result, coffee exports has decreased by 2.2 percent in terms of value and
volume increased negligibly by 3.9 percent.
Regarding the composition of our exports, it is important to note the diversification of products:
re-exports and non-traditional exports (other than coffee, tea, and minerals 3T) account for 34
percent and 39 percent of total exports in value respectively.
Import of Goods
During 18/19 FY, import of goods has increased by 11.2 percent, driven by the increase of capital
goods, Intermediate goods and Energy products by 29.9 percent, 16.7 percent and 13.0 percent
respectively compared to the previous FY due to a volume increase of 36.7 percent, 6.5 percent
and 8.2 percent respectively. Import of consumer goods rose moderately by 2.7 percent, partly
reflecting increased domestic supply following good weather conditions in 2019 season A&B.
In terms of composition, we import mainly capital goods, accounting for 31 percent, followed by
consumer goods and intermediate goods accounting for 30 percent and 28 percent respectively.
| ANNUAL ECONOMIC REPORT 19
Figure 5: Export by Volume and value respectively FY2018/19 (% share)
Source: BNR Statistics Department
Figure 6. Import by Volume and value respectively FY2018/19 (% share)
Source: Statistics department, BNR
2.1.2. Services, Primary and Secondary Accounts
During 18/19 FY, Services have performed well, export of services increased by 11.1 percent
while import of services increased only by 0.8 percent. The export of services were mainly driven
by transport and travel, increasing by 22.3 percent and 7.4 percent respectively.
7%
8%
12%
39%
34%
Export value share 18/19
Coffee Tea Minerals (3Ts)
Other Products Re-export
2% 3%
48%
46%
Export volume share 18/19
Coffee TeaMinerals (3Ts) Other ProductsRe-export
30%
31%
28%
12%
Import value share 18/19
Consumer goods Capital goods
Intermediate goods Energy
34%
4%
45%
17%
Import volume share
Consumer goods Capital goods
Intermediate goods Energy
| ANNUAL ECONOMIC REPORT 20
Both Primary and secondary accounts have improved during 18/19 FY though the increase were
not as expected. Primary income (net) has improved by 11.7 percent during 18/19 FY while
secondary income (net) increased by 4.8 percent compared to 23.6 percent in FY 2017/18. Private
transfers especially net remittances continue to perform well with a 17.9 percent increase but
lower than the exceptional 65.7 percent increase registered in FY 2017/18.
2.1.3. Capital and Financial Accounts
During 18/19 FY, Capital Account showed a good performance as capital grants increased by 32.9
percent from a 4.8 percent increase recorded in 17/18 FY. On the other hand, improvement in
Financial Account was not as good as expected, improving only by 6 percent from 13.8 percent
recorded in previous fiscal year. This can be explained by a shortfall and delay in disbursement
of grants in the first half of 2019 as explained in the fiscal section.
2.2. Public Debt
2.2.1. Debt Stock Developments
Rwanda’s total public and publicly guaranteed debt stock amounted to FRW 4,751.0 billion as of
end June 2019, or 55.3 percent of GDP compared to FRW 3960.0 billion as of end June, 2018
equivalent to 50.1 percent of GDP. The increase in public and publicly guaranteed debt (5.2
percent of GDP) is a combination of both contributions from external public debt and Domestic
Public debt which stood respectively at 43 percent of GDP and 12.3 percent of GDP as of end
June 2019.
External Public debt for the Government of Rwanda is dominated by concessional loans (80.5
percentage share of total external public debt) constituted by Project and budget loans from 16
development partners. The development partners include 6 bilateral and 9 multilateral donors
supporting various sectors of the economy such as Construction, Transport and Communication,
Health, Energy, Agricultural and Rural development, Education and Human Resources
Development. Domestic Public debt is composed of loans and debt securities owed by the
Government of Rwanda to national residents and nonresidents.
Although external concessional loans still constitute the majority of public debt, non-
concessional loans have seen a significant increase over recent years. This includes Eurobond and
guarantees provided by the GoR for the completion of the Kigali Convention Centre (KCC), as well
as loans and leases contracted by Rwandair for the acquisition of new aircrafts in anticipation of
new service routes.
| ANNUAL ECONOMIC REPORT 21
Table 12: Public Debt Stock FY 2018/19
Public and Publicly Guaranteed Debt in mil of FRW
June , 2018 June , 2019
Billion
(FRW) % of GDP
Share of
total debt
(%)
Billion
(FRW) % of GDP
Share of
total debt
(%)
Total public debt 3,960.0 50.1 100.0 4,751.0 55.3 100.0
External 3,220.7 40.8 81.3 3,695.3 43.0 77.8
Concessional 2,538.1 32.1 64.1 2,973.4 34.6 62.6
Multilateral 2,150.7 27.2 54.3 2,608.6 30.3 54.9
Bilateral 387.4 4.9 9.8 364.8 4.2 7.7
Commercial 682.6 8.6 17.2 721.9 8.4 15.2
Eurobond 344.0 4.4 8.7 362.2 4.2 7.6
State Owned Enterprises 338.6 4.3 8.6 359.8 4.2 7.6
Domestic 739.3 9.4 18.7 1,055.7 12.3 22.2
in billions of RWF 694.1 8.8 17.5 1,011.2 11.8 21.3
GDP( current ) in billions of Rwf 7,898.0 8,596.0
Exchange Rate ( end of period) 860.0 905.4
Source: MINECOFIN
Table 13: External and domestic debt service FY 2018/19
June , 2018 June , 2019
Principal Interest Total Principal Interest Total
External (USD million) 30.4 49.8 80.2 30.9 53.6 84.5
External (% Exports) 1.5 2.4 3.9 1.6 2.7 4.3
External (% Revenues) 1.2 2.0 3.3 1.4 2.4 3.8
Domestic (RWF Billion) 38.5 48.8 87.3 17.4 38.9 56.2
Source: MINECOFIN
| ANNUAL ECONOMIC REPORT 22
2.2.2. Debt Servicing
External debt service increased by USD 4.3 million during FY 2018/19 compared to the previous
year. This is due to the beginning of principal payments to some loans after their grace periods
had concluded, as well as payment of interests to new loans without grace periods.
The high increase in domestic debt service is explained by regular new issuance and reopening
of treasury bonds, which is costly, compared to treasury bills. As the policy is to rollover all
matured debt securities (treasury bills and treasury bonds) in order to help the market have
tradable debt securities regularly; consequently, interest paid is greater than principal paid.
However, this increases the maturity profile of our domestic debt portfolio.
2.2.3. External Debt Sustainability Analysis (DSA)
In the current Debt Sustainability Framework (DSF), Rwanda is rated a strong policy performer
using the IMF's Country Debt Carrying Capacity or Composite Indicator (CI) index (3.25 greater
than cut off value of 3.05) and being a lower income country, its public debt sustainability is
subjected to a threshold of 70 percent of PV of total Public Debt/GDP.
The latest updated Debt Sustainability Analysis (DSA) conducted June 2019, suggested continued
low risk level of debt distress to the public debt indicators, with present value of 29 percent of
GDP (against threshold of 55 percent of GDP) at end 2018 higher than 27.9 per cent of GDP at
end 2017. Public Debt burden indicators remain below risk thresholds, except for a short and
temporary breach of debt service indicators in 2023, when the Eurobond issued in 2013 matures.
Table 14: Debt Sustainability Indicators
Indicators 2018
2019
2020
2021
2022
2023
2024
Threshold
PV Debt to GDP 29.0 31.9 34.2 35.8 38.2 40.3 39.8 55
PV Debt to exports 135.2 150.6 160.0 161.9 171.3 173.1 166.5 240
PV Debt service to Exports 4.0 9.0 11.1 14.1 9.8 20.7 9.4 21
PV Debt service to Revenues 4.3 10.5 13.2 17.1 11.9 26.0 12.0 23
Source: MINECOFIN
| ANNUAL ECONOMIC REPORT 23
Table 15: Monetary Aggregates (end period, FRW billion)
Percentage Change (%)
Jun-17/ Jun-18/ Jun-19/
Jun-16 Jun-17 Jun-18
Net Foreign Assets 29.0 9.4 15.3
Net Domestic Assets 3.5 9.7 13.9
Credit to Private Sector 8.0 7.3 17.6
Credit to Government 8.2 28.2 9.1
Broad Money (M3) 12.7 9.6 14.5
Current in Circulation 5.9 13.7 10.8
Deposits 13.4 9.2 14.9
Reserve Money -2.7 21.2 15.3
Source: BNR
2.3. Monetary and Financial Sector
2.3.1. Monetary Sector Developments
During the FY 2018-19, the NBR maintained an accommodative monetary policy stance. In its
conduct of monetary policy, the Bank’s Monetary Policy Committee takes decisions perceived to
drive inflation towards its medium term benchmark of 5 percent, which is the midpoint of a 2 to
8 percent inflation benchmark band. Given that both inflationary and exchange rate pressures
were projected to remain moderate in FY 2018-19, the Central Bank Rate was 5.5 percent
throughout 2018-19 until it was reduced to 5 percent in May 2019 in order to continue supporting
the financing of the economy by the banking sector. Broad money (M3) picked up by 14.5 percent
in 2018-19, reaching FRW 2,220.0 billion, against a growth of 9.6 percent recorded in 2017-18
while growth in outstanding credit to private sector stood at 17.6 percent against 7.3 percent
during the same period.
This growth in monetary aggregates was mainly attributed to the increase in the stock of credit
to the private sector, credit to public enterprise and net foreign assets which contributed 13.6
percent, 2.1 percent and 6.1 percent respectively. This has been mitigated by the negative
contribution of the net credit to government and the other items nets of 0.9 percent and 7.0
percent respectively. New authorized loans for the banking sector grew by 37.4 percent in 2018-
19, from a growth of 4.2 percent recorded in 2017-18.
On the money demand side, the currency in circulation (CIC) increased by 10.8 percent (y-o-y) in
June 2019 from 13.7 percent in June 2018. This increase in CIC is driven by the good performance
| ANNUAL ECONOMIC REPORT 24
of economic activities. In addition, demand deposits increased by 10.8 percent y-o-y in June 2019
against 13.7 percent in June 2018. Foreign currency deposits rose by 10.1 percent from 14.4
percent during the same period.
2.3.2. Interest Rate Developments
Through FY2017/2018, money market interest rates have been declining in line with an
accommodative monetary policy stance and improved banking system liquidity conditions. The
Key Repo Rate dropped from 6.0 percent to 5.50 percent. The weighted normal rate of T-Bills
decreased from 8.78 percent to 6.00 percent between June 2017 and June 2018. With regard to
commercial banks’ interest rates, lending rates slightly declined to 16.98 percent, on average, in
the first half (H1) of 2018 compared to 17.07 percent in the 2017H1 while deposit rates increased
compared to 7.80 percent in the same period last year. For corporates, lending rates declined to
16.4 percent in 2018H1 from 16.7 percent in 2017H1. However, lending rates for individual
borrowers slightly increased to 17.8 percent from 17.4 percent during the same period.
2.3.3. Exchange Rate Developments
In FY 2018-19, the FRW depreciated against the US dollar by 4.5 percent end June 2019,
compared to 3.6 percent recorded end June 2018. The Rwandan Franc (FRW) appreciated by 0.9
percent to the British Pound (GBP) and 0.9 percent to the Euro (EUR). Compared to regional
currencies, the FRW depreciated by 9.5 percent against the Ugandan Shillings (UGX), 3.5, 3.3
percent and 0.2 percent against the Tanzanian Shillings (TZS), the Kenyan Shilling (KES) and the
Burundian Francs (BIF) respectively. Depreciation was mainly due to an increase in formal imports
bill by 14.7 percent while formal exports earnings slightly increased by 1 percent.
Table 16: Interest Rate Developments (percent)
17-Jun 17-Sep 17-Dec 18-Mar 18-Jun 18-Sep 18-Dec 19-Mar 19-Jun
Key Repo Rate 6.00 6.00 5.50 5.50 5.50 5.50 5.50 5.00 5.00
T-Bills Rate 8.78 7.42 7.07 6.27 6.00 5.75 6.64 6.62 6.52
Deposit Rate 7.92 7.86 8.70 8.24 8.33 7.29 7.74 6.52 7.76
Lending Rate 16.76 17.33 17.19 17.08 17.03 17.23 16.14 16.59 16.54
Source: BNR
Looking at the currency basket for Rwanda’s main trading partners, the FRW real effective
exchange rate depreciated by 5.7 percent (y-o-y) end June 2019 against 2.7 percent recorded
during the corresponding period in 2018. This was mostly attributed to the depreciation of the
nominal value of the FRW against currencies of some of the major trading partners. In nominal
| ANNUAL ECONOMIC REPORT 25
Figure 7: FRW per unit currency (Indexed, June 2018 = 100)
Source: BNR
effective terms, it depreciated by 4.0 percent in June 2019 compared to a depreciation of 2.8
percent at the end of June 2018.
2.3.4. Financial Sector Developments
The banking sector was composed of 11 Commercial Banks, 1 Development Bank, 1 Cooperative
Bank and 3 Microfinance Banks. The microfinance sector was composed of 19 Limited Liability
MFIs, 438 Savings and Credit.
Cooperatives (SACCOs), of which 416 are Umurenge SACCOs and 22 other SACCOs end June 2019,
MFIs had 3,779,860 clients. The insurance sector consisted of 14 insurance companies, 12 private
Insurers of which 9 non-life and 3 life Insurers and 2 public health Insurers, RSSB Medical and
MMI. The insurance sector also consists of agents, brokers and loss adjusters regulated by NBR.
As of June 2019, the sector accounts for 707 agents, 17 brokers, and 19 loss adjusters.
The total assets of the financial sector expanded by 14 percent (y-o-y) to FRW 4,919 billion in
2019, compared to the growth of 12 percent registered in June 2018. The banking sector
continues to hold the largest share of the financial sector assets at 66.1 percent, pension at 17
percent, insurance holds 9.7 percent and the microfinance sectors 6.4 percent.
96.
98.25
100.5
102.75
105.
Jul-22 Aug-22 Sept-22 Oct-22 Nov-22 Dec-22 Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23 Jul-23
RWF per Unit currency (Indexed, June 2018=100)
USA EURO Area United Kingdom
96.
99.5
103.
106.5
110.
Jul-22 Aug-22 Sept-22 Oct-22 Nov-22 Dec-22 Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23 Jul-23
RWF per Unit currency (Indexed, June 2018=100)
Uganda Kenya Tanzania Burundi
| ANNUAL ECONOMIC REPORT 26
The NBR updated legal and regulatory framework for the financial sector responding to modern
market development and challenges. Equity increased by 25 percent due to an increase of
general reserves funds, retention of FRW 4.6 Billion net profit of 2017-18, and reevaluation of
buildings as well as a change in classification. With regards to the financial soundness indicators
of banks, in FY2018/19 the banking system remains adequately capitalized. The total Capital
Adequacy Ratio (CAR) for the banking sector stood at 23.3 percent as of June 2019 compared to
21.9 percent from the previous year. Banks also continue to maintain the liquidity coverage ratio
above 100 percent (180.5 percent in 2018/19).
The quality of bank’s loan portfolio improved, with the Non-Performing Loans (NPLs) declining
to 5.6 percent as of June 2019 from 6.9 percent in June 2018. The improvement in the banking
sector asset quality was underpinned by a strong performance of the economy during the first
half of 2019 that enhanced the debt servicing capacity of borrowers, as well as write-offs of bad
loans that were in the loss category for more than one year.
Table 17: Financial Soundness Indicators (percent)
Jun-17 Jun-18 Jun-19
Capital Adequacy for banks: Solvency Ratio (min 15%) 20.8 21.9 23.3
Asset Quality for banks: NPLs/Gross Loans 8.2 6.9 5.6
Source: BNR
3. ECONOMIC OUTLOOK
3.1. Real Sector
In FY 2018/19, Rwanda recorded a high growth rate, with the highest double digit in the last
quarter over 5 years for the second quarter of 2019. In line with the trend observed in the
first half of 2019, GDP growth forecast has been revised upward from 7.8 to 8.5 percent in
2019. The main drivers remain the same as for the first half, namely construction and
manufacturing reflecting ongoing construction projects and Made in Rwanda policy; as well
as trade and transport services following import growth.
Over the medium term, growth is projected to remain strong at 8 percent, as investment will
generate returns and an improved performance in Export on average. Inflation headline is
expected to be maintain around the 5.0 percent target in the medium term.
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3.2. Fiscal Policy Outlook
FY 2019/2020 remains on track to support the government’s medium-term fiscal policies. The
first half of 2019 saw a combination of higher-than-expected projects spending in the presence
of lower-than-expected grants and loans disbursement which resulted into higher fiscal deficit.
The FY2019/20 budget and medium term fiscal policies will continue to reflect the policies of
fiscal consolidation and prudent borrowing to keep debt and external balances sustainable, with
renewed focus on strong fiscal risks management.
Domestic revenue will remain a key source of future spending as ongoing tax policy and tax
administration measures are expected to produce results. Tax-to-GDP, estimated at 16.4 percent
of GDP in 2019/20, is expected to increase by 0.2 percent of GDP every year over the medium
term. Regarding expenditures, current expenditure will remain contained at 15 percent of GDP
and below in the medium-term, as priority is given to capital expenditure maintained at 12
percent of GDP over the medium-term to implement our NST 1 priority projects. As a result, the
non-debt creating fiscal deficit on a five years rolling average basis, is 5.5 percent of GDP in
2019/20 and 2020/21, declining to 5.3 percent of GDP in 2021/22, thus respecting the fiscal rule
under the Policy Coordination Instrument (PCI) program with the IMF.
3.3. External Sector Outlook
The external position is expected to continue to strengthen over the medium term. In 2019, the
current account deficit is expected to widen more compared to the previous year as percent of
GDP, reaching 10.6 percent of GDP from 7.9 percent in 2018. However, positive export trends
and more modest import growth are expected to support the continued narrowing of the
current account deficit to around 9.9 percent of GDP in 2020 and 7.3 percent in 2023. A gradual
increase in financial flows; and current account improvements should support a continued
recovery in external buffers in the next years with a reserve coverage around 4.5 months of
imports of goods and services in the medium term.
3.4. Debt Outlook
Going forward, the government’s medium-term debt strategy aims to: maintain the low risk
status while financing development projects through prioritizing concessional debt; support
domestic market development with issuance of long-term debt securities in replacement of
short-term debt securities; and mitigate risks associated with contingent liabilities. This debt
strategy will help finance public investment that will translate into economic growth, increased
domestic revenues, enhanced export performance, and build-up of international reserves, which
in return will enhance the country’s capacity to service and repay its debt.
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This medium term debt strategy will also support the cost-risk minimization of new contracted
and guaranteed loans, and shall support monetary policies objectives of maintaining a stable
inflation while protecting the economy against external shocks.
3.5. Monetary Policy and Financial Outlook
In FY2019/20, monetary policy will focus on ensuring stable macroeconomic and financial
environment. The Monetary Policy Committee (MPC) will regularly update its policy rate to
ensure that the assumptions underpinning the inflation forecasts do not deviate from its original
projection of around 2.2 percent by end of 2019. The inflation forecast over the policy horizon
shows an increase in headline inflation but is expected to remain within the benchmark band
around 5 percent.
Maintaining a market-driven exchange rate regime consistent with existing monetary policy
framework is central to BNR’s medium-term monetary and financial policy options. Given that
exchange rate is an important tool for defense against exogenous shocks, BNR is committed to
supplying foreign exchange to the market to service import payments from the rest of the world,
particularly capital and intermediate goods that are needed to facilitate the execution of
infrastructure capital projects that are linked to NST1.
To ensure a sound and stable financial system, BNR will continue to implement a wide range of
regulatory policies. The Bank remains committed to reviewing and updating legal instruments
and at the same time creating new ones in line with international best practice and market
developments. Since March 2019, the BNR has considered the following legal instruments and
other initiatives:
i. Directive on Loan to Value Ratio;
ii. Regulation Governing the Shareholding, Acquisition and Amalgamation of Banks;
iii. Regulation on Major Investment and Placements of Banks;
iv. Insurance Sector Anti-fraud and Related Financial Crimes Forum;
v. Regulation on Minimum Internal Control and Audit for Banks;
vi. Law Governing Credit Reporting System;
vii. Law on Prevention and Punishment of Money Laundering and Terrorism Financing
(AML/CFT Law);
viii. Regulation Governing Non-Deposit Taking Financial Institutions (NDFIS);
ix. Domestically Systemically Important Banks (DSIBs) Framework;
x. Regulation on Licensing Conditions for Banks and Insurers;
xi. Regulation Governing the Micro-Insurance Organization;
xii. The Directive on Risk Based Capital (RBC) Requirements.
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In addition to the measures, the Bank is taking concrete steps to implement true repo in order
to support interbank market development while deepening the financial markets for proper
monetary policy transmission.
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4. CONCLUSION
Rwanda’s overall economic performance and outlook remain positive. The story of strong and
steady growth in Rwanda since 2007 above 7 percent average is mainly attributable to sound
economic policies, forward-looking government-led investments with donors, effective
implementation of major infrastructure projects, prudent debt management strategy, and
relatively sturdy performance in agricultural production, initially in coffee and tea but the period
FY2018/19 has seen growth driven mainly by industry and service sectors. The Government
remains committed to accelerating economic growth in line with the National Strategy for
Transformation (NST1), in which SDG objectives are implanted.
Looking ahead to FY2019/20 and beyond, the Government will continue to support initiatives
that are aligned with the country’s overall aspiration of making Rwanda a high-income country
by 2050, requiring sustainable provision of modern infrastructures, increasing productivity and
competitiveness, and improving quality of life by pushing all Rwandans at the center of
development. This will be guided by strong fiscal risks management to build precautionary
buffers that create fiscal space and at the same time implement an effective monetary policy
framework that supports stable macroeconomic and financial environment. The Government
will also focus on its medium term plans of driving development through higher productivity
growth, encouraging private sector participation and export diversification, while mobilizing
resources for higher-return investments. Achieving such targets demand the need to strengthen
domestic resource mobilization efforts by improving tax administration and compliance levels
across sectors, without also compromising the essential requisites for proper debt management
to ensure sound fiscal consolidation and sustainability.