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REPUBLIC OF RWANDA
Ministry of Finance and Economic Planning
THE ANNUAL ECONOMIC REPORT
FISCAL YEAR 2012/2013
December 2013
RWANDA Annual Economic Report
Ministry of Finance and Economic Planning
Fiscal Year 2012/2013
(Date: 18/12/13)
TABLE OF CONTENTS
TABLES ..................................................................................................................................................- 1 FIGURES ................................................................................................................................................- 1 EXECUTIVE SUMMARY.....................................................................................................................- 1 I.
THE INTERNATIONAL ECONOMIC AND FINANCIAL SITUATION ...................................- 3 1.1 Global economic growth ..............................................................................................................- 3 1.2 World trade...................................................................................................................................- 4 1.3 Inflation and commodity prices ...................................................................................................- 5 1.4 Global financial market developments.........................................................................................- 7 -
II.
DOMESTIC ECONOMIC PERFORMANCE ...............................................................................- 8 2.1. Real sector ....................................................................................................................................- 8 2.1.1.
Economic growth ..............................................................................................................- 8 -
2.1.1.1.
Growth by economic sector ........................................................................................... - 8 -
2.1.1.2.
Growth by expenditure components............................................................................- 11 -
2.1.2.
Inflation ........................................................................................................................... - 14 -
2.2. Fiscal performance .....................................................................................................................- 15 2.2.1
Budget and revised budget .............................................................................................. - 15 -
2.2.2.
Budget implementation ...................................................................................................- 16 -
2.2.2.1. Performance of resources .................................................................................................- 16 i.
Domestic resources .................................................................................................................- 17 -
ii. External resources ..................................................................................................................- 18 2.2.2.2. Performance of outlays ....................................................................................................- 21 i.
Recurrent spending .................................................................................................................- 21 -
ii. Capital expenditure.................................................................................................................- 23 iii. Net lending ............................................................................................................................. - 24 iv. Arrears accumulation and payments ......................................................................................- 24 2.2.2.3 Financing of the 2012/2013 budget...................................................................................- 25 2.3. External sector performance ......................................................................................................- 25 2.3.1.
The overall balance of payments.....................................................................................- 25 -
2.3.2.
Trade balance ..................................................................................................................- 26 -
2.3.3.
External debt developments ............................................................................................ - 31 -
2.3.4.1 Debt outstanding at end June 2013 ...................................................................................- 31 2.3.4.2. External debt servicing.....................................................................................................- 32 -
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning
Fiscal Year 2012/2013
(Date: 18/12/13)
2.3.4.3 Debt sustainability analysis (DSA) ...................................................................................- 32 2.4. Monetary and financial sector performance ...............................................................................- 35 2.4.1.
Monetary sector developments .......................................................................................- 35 -
2.4.2.
Financial sector developments ........................................................................................- 37 -
2.5. Regional integration ...................................................................................................................- 38 2.5.1.
Progress to date ...............................................................................................................- 38 -
2.5.2.
Trade with the EAC ........................................................................................................- 39 -
III. ECONOMIC OUTLOOK FOR 2013-14 ........................................................................................- 40 3.1. Real sector ..................................................................................................................................- 40 3.2. Fiscal policy ............................................................................................................................... - 40 3.3. Monetary policy ......................................................................................................................... - 40 3.4. External sector............................................................................................................................ - 40 CONCLUSION .....................................................................................................................................- 41 -
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
TABLES
Table 1: world and regional GDP growth (per cent)................................................................................. - 3 Table 2: Growth of trade in goods and services (per cent) ....................................................................... - 4 Table 3: GDP and GDP per capita ............................................................................................................ - 8 Table 4: Growth by key economic sectors .............................................................................................. - 10 Table 5: Operations of the central government ....................................................................................... - 16 Table 6: Tax revenue performance in 2012/2013 ................................................................................... - 17 Table 7: Budgetary grants and loans (in billion RWF) ........................................................................... - 19 Table 8: Project loans (in billion RWF) .................................................................................................. - 20 Table 9: The trade balance in value terms .............................................................................................. - 27 Table 10: The trade balance in volume terms ......................................................................................... - 27 Table 11: Rwanda Public & Publicly Guaranteed Debt (million USD) ................................................. - 31 Table 12: debt servicing in 2011/12 and 2012/13 ................................................................................... - 32 Table 13: the evolution of Rwandan debt ratios ..................................................................................... - 32 Table 14: Monetary aggregates ............................................................................................................... - 35 Table 15: Interest rate developments ...................................................................................................... - 37 Table 16: Key financial stability indicators for the banking system (percentages) ................................ - 38 Table 17: Trade with the EAC ................................................................................................................ - 39 -
FIGURES
Figure 1: world and regional headline inflation ........................................................................................ - 5 Figure 2: EAC inflation during FY 2012-2013 ......................................................................................... - 6 Figure 3: commodity price indices ............................................................................................................ - 6 Figure 4: contributions to GDP growth by sector ..................................................................................... - 9 Figure 5: contribution to services real GDP growth by services sub-sector ........................................... - 10 Figure 6: contribution to industry real GDP growth by industry sub-sector .......................................... - 11 Figure 7: GDP levels by expenditure (billion RWF) .............................................................................. - 12 Figure 8: year-on-year growth of GDP and its expenditure components (per cent) ............................... - 13 Figure 9: contribution to real GDP expenditure growth over time ......................................................... - 13 Figure 10: inflation indicators 2012-13 .................................................................................................. - 14 Figure 11: the Balance of Payments and Changes in Net Foreign Assets .............................................. - 26 Figure 12: comparing exports and imports by each fiscal half year ....................................................... - 28 Figure 13: exports by value (US$ million) in FY 2012-2013 ................................................................. - 28 Figure 14: exports by volume (kg) in FY 2012-2013 ............................................................................. - 29 Figure 15: imports by value (USD million) in FY 2012-2013 ............................................................... - 29 Figure 16: import growth (H2/H1) over the fiscal year .......................................................................... - 30 Figure 17: various charts from the DSA ................................................................................................. - 34 Figure 18: exchange rates (normalized to 1 at the start of the fiscal year to show percentage changes) - 36 -
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
EXECUTIVE SUMMARY
GDP grew strongly and inflation was moderate, but economic activity slowed in the second half of
the fiscal year.
The Rwandan economy recorded real GDP growth of 6.8 per cent during 2012/13, driven by growth in
services and construction.1 But there was a notable slowdown between the first and the second half of the
fiscal year due to the suspension and delay in the delivery of budget support funds and a challenging
international economic climate.
Annual headline inflation fell to 3.7 per cent in June of 2013 from 5.9 per cent recorded in June 2012
thanks to increased supply of food crops and decelerating import prices as a result of moderated inflation
in Rwanda‘s main trading partners
In expenditure terms of GDP, the external sector performed well this fiscal year, with exports growing by
43 per cent, well above the EDPRS II annual average target of 28 per cent. However, growth in
consumption markedly slowed down over this fiscal year.
The December 2012 revised budget accounted for the shortfall in donor funding. It resulted in
reduced expenditure but improved revenue collection, and the resulting budget deficit was not as
high as initially estimated.
However, total revenue and grants fell short of the projections in the December 2012 revised budget.
Despite, domestic tax revenue collections that performed well and exceeded the revised budget target; it
was the large shortfall in both budget support grants and capital grants that contributed to the overall
reduction in income.
Both capital and recurrent expenditure were reduced in the revised budget. Recurrent expenditure was
approximately on target by June 2013 as non-priority spending was reduced over this fiscal year, but
capital expenditure was lower than expected. Again, lower foreign finance was the main contributor to the
shortfall.
The aid delay and suspension notwithstanding, the budget deficit was less than the projections in the
revised budget of December 2012. By the end of the fiscal year, the deficit was 5.3 per cent of GDP
compared to the December 2012 estimate of 6.2 per cent. The deficit was fully financed by net external
loans (which include the euro bond receipts) but the Government was obliged to increase its domestic
debt in FY2012/13 through its use of the overdraft facility at BNR and increased Treasury bills and bonds
sales.
Strong export growth improved the trade balance while import growth slowed in the second half of
the year. The overall Balance of Payments was positive for the fiscal year (due in part to the timing
of the euro bond).
1
All growth rates quoted in this report are period-on-period-a-year-ago, unless otherwise stated.
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
Exports grew far faster than imports in FY2012/13. Minerals and non-traditional items were key for this
while import growth was driven by consumption goods. The trade deficit (exports less imports of goods
and services) increased by 5 per cent in FY 2012/13. This deterioration is smaller than previous years as
import growth slowed down in the second half of the fiscal year. The overall Balance of Payments was
positive in FY2012/13, at $US 245.4 million, reflecting in part the accumulation of euro bond proceeds.
Rwanda’s stock of debt is rising, due partly to government action in response to the aid delays and
suspensions.
Rwanda‘s stock of foreign and domestic debt was on the rise by end June 2013. It was 30.2 per cent of
GDP in June 2013, up from 23.0 per cent at end June 2012. The increase in external debt was accounted
for by a debut bond, which was successfully issued in April 2013. Domestic debt (T-bills) also increased
as a result of delays in donor disbursements.
At the end of the year, monetary policy eased aiming to boost private sector credit growth that was
strong during the first half of the year but, similarly to GDP growth, it slowed in the second half of
the year.
Following low inflationary pressure in Rwanda‘s trading partners, easing pressure on foreign exchange
markets compared to 2012 and concerns about decelerating private credit growth, BNR eased its
monetary policy by cutting the key repo rate from 7.5 per cent to 7 per cent in June 2013. Credit to the
private sector expanded by almost a fifth in this fiscal year, but the majority of this growth was recorded
in the first half of the year. Slowing credit growth was explained by low domestic demand associated with
lower Government spending in January – June 2013.
Privatization continued and regional integration with EAC expanded at a healthy rate.
Privatization continued though proceeds were lower than for the previous fiscal year. The majority of the
received funds came from the privatisation of Mulindi and Shagasha Tea Factories. Trade within the EAC
region significantly expanded following a reduction in import tariffs, reduced non-tariff barriers and more
efficient border controls. Exports to the EAC have grown notably faster than exports to the rest of the
world this year.
Outlook for 2013/14: continued growth coupled with moderate inflation, alongside the
implementation of EDPRS II.
A more moderate economic growth is expected during FY2013/14 as the economy recovers from the
effects of aid cuts. Inflation is projected to remain below 5 percent average over the year.
For 2013/14 fiscal year, the budget deficit is expected to be 10 per cent larger than in 2012/13, due to the
intention of the government to increase capital spending in key priority sectors identified in EDPRS II and
to meet its required development targets.
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
I.
Fiscal Year 2012/2013
THE INTERNATIONAL ECONOMIC AND FINANCIAL SITUATION
We are interested in this chapter in reviewing the international economic and financial development
during the reporting period because Rwanda has increasingly become connected to the rest of the world
and whatever happens on the international scene, affects in one way or another the Rwandan economy.
1.1 Global economic growth
In the October update of the IMF World Economic Outlook, global economic growth for 2012 was
revised down to 3.2 per cent and projected to be 2.9 per cent for 2013 (see Table 1). 2 Fiscal consolidation
and expected monetary tightening in the US is one brake on growth in 2013, and in Europe the banking
crisis has still not been resolved. However, it is the growth outlook for emerging economies that is the
main explanation for the slowdown in global growth. Both India and China are now expected to grow this
year by less than previously estimated, with the IMF thinking that the slowdown is more structural than
cyclical. Given how integrated into the global supply chain these two countries are, this may pose a
serious problem for their trading partners in the short and medium term.
Likewise, the OECD Economic Outlook, published in November 2013, estimated that global growth
would be only 2.7 per cent in 2013, almost a half percentage point revision downward since their previous
publication in May. They estimate 2012 world growth at 3.1 per cent. Like the IMF, they also cited
concerns with emerging market economies as the major holdback on global recovery. Other downside
risks were a slowdown in global trade, FDI flows and in fixed investment.
Table 1: world and regional GDP growth (per cent)
World
Advanced economies
Euro area
United States
Major advanced economies (G7)
Emerging market and developing economies
Developing Asia
China
India
Latin America and the Caribbean
Middle East, North Africa, Afghanistan, and
Pakistan
Sub-Saharan Africa
2011
3.9
1.7
1.5
1.8
1.6
6.2
7.8
9.3
6.3
4.6
2012
3.2
1.5
-0.6
2.8
1.7
4.9
6.4
7.7
3.2
2.9
2013
2.9
1.2
-0.4
1.6
1.2
4.5
6.3
7.6
3.8
2.7
3.9
5.5
4.6
4.9
2.3
5.0
Projections
2014
3.6
2.0
1.0
2.6
2.0
5.1
6.5
7.3
5.1
3.1
3.6
6.0
2015
4.0
2.5
1.4
3.4
2.5
5.3
6.6
7.0
6.3
3.5
4.1
5.7
Source: IMF – WEO October 2013
2
All growth rates quoted in this report are period-on-period-a-year-ago, unless otherwise stated.
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
Economies like the BRICs helped pull up global growth in the aftermath of the global financial crisis, but
these same economies now pose downside risks. Risks to growth in advanced economies have not gone
away – the United States may yet enter a new fiscal crisis and the eurozone debt and banking crises
remain stubbornly unresolved – but growth has returned to countries like the United States and the United
Kingdom.
In Sub-Saharan Africa, GDP grew by 4.9 per cent in 2012 and is projected to grow similarly in 2013 at
5.0 per cent (according to October 2013 WEO). This makes it one of the fastest growing regions in 2013.
Almost a third of countries in the region are growing at 6 per cent or more. Growth here is driven by
strong investment demand but the region is of course exposed to a possible growth slowdown in emerging
markets via trade and investment links and could be hit by the perennial problem of commodity price
volatility or capital outflows (due to US Federal Reserve policy changes). For the majority of countries in
the region, risks to growth stem mainly from external factors. It remained relatively unscathed during the
financial crisis but its trade is far more integrated with emerging markets today than its financial systems
were with advanced economies five years ago. Therefore spillover effects from a slowdown in global
growth would be greater today than previously.
1.2 World trade
The sharp downturn in global trade that occurred in 2012 continued into 2013, as Table 2 shows. For
2013, global trade in goods and services is projected to grow by 2.9 per cent, only a slight improvement
on 2012 and well below the pre-Great Recession average of 7.0 per cent. Weak demand in the euro zone
continues to constrain global trade but the successful completion of the Bali trade talks in early December
may boost growth in the medium term. Comparing advanced economies to emerging and developing
economies, both export and import growth is stronger in the latter.
Table 2: Growth of trade in goods and services (per cent)
World trade volume (goods and services)
Imports
Advanced economies
Emerging market and developing countries
Exports
Advanced economies
Emerging market and developing countries
World Exports (USD billion)
Projections
2013
2014
1995-2004
2011
2012
7.0
6.1
2.7
2.9
4.9
6.8
8.0
4.7
8.8
1.0
5.5
1.5
5.0
4.0
5.9
6.3
8.7
7,840
5.7
6.8
22,333
2.0
4.2
22,537
2.7
3.5
23,164
4.7
5.8
24,367
Source: IMF – WEO October 2013.
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
1.3 Inflation and commodity prices
Inflation (consumer prices) was 2.0 per cent in advanced economies in 2012 and projected to be 1.4 per
cent in 2013. The lack of high inflation is one reason accommodative monetary policy in the United States
and the eurozone remains ongoing (in fact, there is a small risk of deflation in the eurozone at present,
despite the amount of money injected into the financial system by the ECB). The slowdown in consumer
price growth reflects the lack of aggregate demand. Even when economic activity picks up, it is not
expected to lead to high inflation due to the output gaps in these advanced economies. In emerging and
developing economies, on the other hand, inflation was 6.1 per cent in 2012 and projected to be 6.2 per
cent in 2013. This stability in this region is a reflection of lower commodity prices due, in part, to slower
demand from China. Sub-Saharan Africa is projected to see the sharpest fall in inflation between 2012
and 2013
.
Figure 1: world and regional headline inflation
14
12
Sub-Saharan Africa
Per cent
10
8
Emerging market and
developing economies
6
Developing Asia
4
World
2
0
Advanced economies
Source: IMF – WEO October 2013
Consistent with this, inflation in the EAC moderated substantially compared to the previous fiscal year
(see Figure 2). By June 2013 all countries except Burundi had inflation below 8 per cent, which is one of
the EAC macro convergence criteria. All countries experienced a steady downward trend in inflation
throughout the year (again, except for Burundi, which saw an upswing in the last quarter of the fiscal
year). This lower inflation was driven in part by lower food and fuel prices.
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
Figure 2: EAC inflation during FY 2012-2013
18
16
Tanzania
14
Per cent
12
Burundi
10
8
Uganda
6
4
Kenya
2
0
Rwanda
Source: MINECOFIN
As Figure 3 shows, both fuel and food and beverage prices fell on aggregate in 2013. In the case of food
and beverages, the reduction was less than in 2012 and 2013. For fuel, this is the first annual drop since
the sharp dip in 2009. Over 2011-2013, both indices have shown greater stability than in previous years.
Figure 3: commodity price indices
250
Index 2005=100
200
150
100
50
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Commodity Fuel (energy) Index
Commodity Food and Beverage Price Index
Source: IMF – WEO October 2013
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
1.4 Global financial market developments
The eurozone is still struggling to find a resolution to its banking and debt crises, as can be seen by the
Cyprus bail-out in March 2013 and the 18 month-long recession it only emerged from in August 2013. In
late 2012, the ECB introduced ‗outright monetary transactions‘, a bond-buying exercise that central banks
in other parts of the world had been practicing for several years. This had a positive impact on the
monetary policy transmission but huge risks remain with bank and government balance sheets.
Sub-Saharan Africa has not been directly negatively impacted by the eurozone crises, but until it is
resolved, European growth will remain subdued and this will adversely affect export demand elsewhere.
Integration into global financial markets, however, is continuing apace with six SSA countries issuing
bonds in 2013. The bonds were well received.
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
II.
Fiscal Year 2012/2013
DOMESTIC ECONOMIC PERFORMANCE
2.1. Real sector
2.1.1. Economic growth
The Rwandan economy remained resilient and continued to grow at a sustained pace while recording
moderate inflation. Despite the slowdown in the second half of the year, real GDP growth in 2012/13 was
6.8 per cent.
Table 3: GDP and GDP per capita
GDP, Rwf billions, current prices
GDP, Rwf billions constant 2006 prices
Real GDP growth rate (per cent)
GDP per capita, Rwf thousands, current prices
GDP per capita, Rwf thousands, constant 2006 prices
Real GDP per capita growth rate (per cent)
* Data from National Institute of Statistics Rwanda
2011/12*
4,081
2,631
9.1
379
245
6.5
2012/13*
4,606
2,810
6.8
418
255
4.2
This economic growth has translated into strong growth in real GDP per capita, at 4.2 per cent in 2012/13.
2.1.1.1. Growth by economic sector
Growth was quite variable both across sectors and across time in FY2012/13. Agriculture and industry
grew more quickly in the second half of the year than the first, whereas the opposite is true for services.
Good weather conditions are partly driving rebound in the agriculture sector during the FY2012/2013.
The strong growth in the industry sector was largely driven by the expansion in the construction sector.
Construction sector recorded significant improvement in regulations, as observed in the World Bank‘s
2014 Doing Business report. Figure 4 shows the contribution of each sector to overall GDP growth and
the slowdown in services growth in the second half of the year is quite apparent. As services make up the
largest part of the economy (45 per cent in nominal terms in 2012/2013), they influence the overall GDP
growth figure most.
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
Figure 4: contributions to GDP growth by sector
9%
8%
7.7
7%
6.8
5.9
6%
5%
5.1
Services
2.1
3.6
4%
Agriculture
3%
2%
2.0
Total GDP
1.7
1.4
1%
0%
Industry
1.7
1.3
0.9
July 12 - Dec 12
Jan 13 - June 13
Full Fiscal Year
Source: NISR Q2 2013 National Accounts
Note: the numbers in the bars refer to the percentage point contribution to total GDP growth, whereas the number by the black diamond
refers to GDP growth itself, so is in percentage terms. The white space between the diamonds and the bars is accounted for by adjustments in
the GDP series.
Growth in services was slightly lower than the previous fiscal year, due to the suspension and delays in
the delivery of budget support funds and a challenging international economic climate; they recorded 8
per cent growth this fiscal year against 11 per cent growth in 2011/12 (see Table 4). This performance
was mainly driven by strong growth of 9 per cent in wholesale and retail trade as well as expansion in the
transport and communication. In addition, the finance and insurance sub-sector performed well in spite of
the private sector credit slowdown during this fiscal year compared to last. Figure 5 shows the
contribution of each services sub-sector to total services growth; wholesale and retail trade was the largest
contributor.
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
Table 4: Growth by key economic sectors
Agriculture
Food crops
Industry
Mining and quarrying
Manufacturing
Construction
Services
Wholesale and retail trade
Transport, storage, communication
Finance, insurance
Output, Rwf billions,
2006 constant prices
2011/12
2012/13
867
901
741
769
392
436
14
15
152
147
218
266
1239
1,327
347
379
227
255
84
98
Growth rate
(per cent)
2011/12
6.0
7.0
12
24
7
16
11
13
14
12
2012/13
4.0
4.0
11
6
-3
22
8
9
13
16
Share of total current
price output (per cent)
2011/12
2012/13
32
33
28
28
16
16
1
1
6
6
8
9
46
45
13
13
8
8
3
3
Source: NISR Q2 2013 National Accounts
Figure 5: contribution to services real GDP growth by services sub-sector
9%
8%
7%
Education
0.8
Public administration
0.8
6%
Finance, insurance
1.1
Transport, storage, communication
5%
4%
2.3
Wholesale and retail trade
3%
Other services not mentioned
2%
Real GDP Growth in Services
1%
2.6
0%
FY 2012/2013
Source: NISR Q2 2013 National Accounts
Note: the numbers in the bars refer to the percentage point contribution to services GDP growth, whereas the number by the black diamond
refers to services GDP growth itself, so is in percentage terms.
Agriculture, which rose by 4 percent, registered a slowdown in growth compared to the previous year due
to the low performance in food crops. It is the performance of food crops that determines Rwandan
agricultural growth, as can be seen from its share in total output in Table 4.
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
Construction recorded a robust growth of 22 per cent and it almost exclusively drove growth in the
industrial sector (see Figure 6). Construction makes up 9 per cent of total output, so its strong growth has
a significant impact on the rest of the economy. Worryingly, manufacturing contracted this year by 3 per
cent; this follows very reasonable growth in the previous three fiscal years. Contraction was caused by a
slowdown in furniture manufacture, despite its small weight in overall manufacturing.
Figure 6: contribution to industry real GDP growth by industry sub-sector
14%
12%
10%
8%
6%
Construction
12.2
Utilities
Manufacturing
4%
Mining and quarrying
Real GDP growth in industry
2%
0%
-1.3
-2%
FY 2012/13
Source: NISR Q2 2013 National Accounts
Note: the numbers in the bars refer to the percentage point contribution to industry GDP growth, whereas the number by the black diamond
refers to industry GDP growth itself, so is in percentage terms.
2.1.1.2. Growth by expenditure components
GDP can also be analysed in expenditure terms. Figure 7 below displays two interesting features of the
data: Firstly, private consumption was fairly stagnant in level terms between FY 2011/12 and FY
2012/13. Private consumption remained subdued due to a number of factors: the slowdown in
government expenditure (due to aid suspensions and delays); the consequent depreciation of the Rwandan
franc made imported consumption goods more expensive (although this was counteracted somewhat by
higher inflation rates in regional trading partners); and a slowdown in private sector credit creation also
contributed.
Secondly, exports grew quite noticeably between the two fiscal periods. Export growth was led by strong
growth in coffee and coltan. Coffee growth was quantity driven – exporters sold off their surplus crop
from the second half of 2012 – while coltan growth was price driven – between June 2012 and June 2013,
its price increased by 24 per cent.
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
Figure 7: GDP levels by expenditure (billion RWF)
5,000
Billion RWF
4,000
3,000
Exports
2,000
Gross capital formation
Private consumption
1,000
Govt consumption
0
Imports
Total real GDP
-1,000
-2,000
2011/12
2012/13
Source: NISR Q2 2013 National Accounts
The most notable change in FY2012-2013 was that of consumption, which slowed from 6 per cent growth
in FY2011/12 to 2 per cent growth in FY2012/13 (see Figure 8). Consumption forms the majority of
domestic demand so this slowdown is worrying. However, gross capital formation, the other main
component of domestic demand, increased its growth rate from 10 to 15 per cent.
Exports have been growing steadily since 2009/10, and their highest growth was recorded in FY
2012/2013, at 43 per cent. This is well in excess of the EDPRS II target of 28 per cent annual average
growth. For the past three fiscal years, export growth has exceeded import growth, meaning that external
demand is strong. However, because total consumption by households and government is so much bigger
than exports or imports in the Rwandan economy, a slowdown in domestic demand cannot be fully be
compensated for by an increase in external demand.
Taking a longer view of the components of GDP by expenditure, consumption - a large part of domestic
demand - was responsible for a much smaller contribution to growth than previously (1.9 percentage
points in FY2012/13 compared to 5.9 percentage points in FY2011/12, see Figure 9). It is also worth
highlighting the detailed behaviour of gross capital formation: In FY2012/2013, gross capital formation
was the largest contributor to GDP growth (3.3 percentage points). In absolute terms, the resource (trade)
balance deficit has been slowly narrowing since 2010/2011, meaning external demand is increasing over
time. This explains why it positively contributed to GDP growth (1.6 percentage points in FY2012/13).
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
Figure 8: year-on-year growth of GDP and its expenditure components (per cent)
50%
40%
30%
20%
10%
0%
-10%
2006/07
2007/08
2008/09
2009/10
2010/11
2011/12
-20%
Consumption
Gross capital formation
Exports (goods and services)
Imports (goods and services)
GDP
Source: NISR Q2 2013 National Accounts
Figure 9: contribution to real GDP expenditure growth over time
18%
15%
5.5
12%
3.4
9%
6%
3%
0.1
4.2
2.3
9.7
8.4
4.0
5.9
1.6
3.3
1.9
0%
-3%
7.9
0.9
-5.7
-1.7
-1.7
-3.8
2008/09
2009/10
2010/11
-6%
2007/08
Total final consumption expenditure
Resource balance (exports less imports)
2011/12
2012/13
Gross capital formation
GDP Growth
Source: NISR Q2 2013 National Accounts
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
2.1.2. Inflation
The inflation rate has been maintained at low levels since 2012 as a result of prudent and efficient
monetary policy, good economic performance and well-coordinated economic policies to limit the impact
of exogenous shocks, easing inflationary pressures in trading partners as well as stable international oil
prices.
Annual headline inflation fell to 3.7 per cent in June of 2013 from 5.9 per cent and 3.9 per cent recorded
in June and December 2012 respectively. Core inflation (excluding fresh food and energy) was 3.4 per
cent in June 2013 after 3.7 per cent and 2.5 per cent in June and December 2012 respectively.
In terms of origin, the moderate inflation rate was largely attributed to domestic inflation which stood at
4.1 per cent in June 2013 from 6.8 per cent and 4.1 per cent in June and December 2012 respectively.
Domestic inflation was mainly driven by food and non-alcoholic beverages. Imported inflation
significantly slowed down to 1.9 per cent in June 2013 from 2.7 per cent and 3.2 per cent respectively in
June and December 2012, partially offsetting the impact of domestic inflation.
Figure 10: inflation indicators 2012-13
30%
8%
7%
6%
5%
4%
3%
2%
1%
0%
20%
10%
0%
Locally produced
Jun-13
May-13
Apr-13
Mar-13
Feb-13
Jan-13
Dec-12
Nov-12
Oct-12
Sep-12
Aug-12
Jul-12
Jun-12
-10%
Fresh products
Imported
Energy
Core
Jun-13
May-13
Apr-13
Mar-13
Jan-13
Feb-13
Dec-12
Nov-12
Oct-12
Sep-12
Aug-12
Jul-12
Jun-12
8%
6%
4%
2%
0%
CPI
Source: NISR. Data are month-on-month a year ago change
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
2.2. Fiscal performance
2.2.1 Budget and revised budget
The original budget for FY2012/2013 was prepared under serious downside risks in the international
outlook for 2012 and beyond, causing weak global demand, lower commodity prices but high oil prices
and uncertainties in ODA flows. These changing conditions were expected to affect budget
implementation in fiscal year 2012/2013.
Against this backdrop, the original total budget approved by Parliament for fiscal year 2012/2013 in June
2012 amounted to RWF 1385.3 billion. Details of the original budget are shown in Table 5.
The implementation of the 2012/2013 budget, especially in the July-December 2012 period, proved
difficult due to the suspension of aid as well as delays in disbursements. This policy change by some
donors reduced the flow of resources - both domestic and external - to the budget.
Taking into account the performance in the July-December 2012 period, the Government revised the
2012/2013 budget in December 2012 to reflect the expected reduction in official donor resources and
projected shortfalls in domestic revenue collections on account of a possible slow-down in economic
activity resulting from the aid suspension. The revision also allowed the inclusion of the expected
proceeds from the issuance of the EURO bond receipts in the early part of 2013 and the utilisation of
these funds.
As a result of the changes, the total original budget of RWF 1385.3 billion was increased to RWF 1550
billion, showing a net increase of RWF 164.7 billion. This revised figure was the net result of reducing
the original budget by RWF 78 billion to reflect the decrease in total resources (comprising suspension of
aid of RWF 54.2 billion and shortfalls in domestic tax and non-tax revenue as well as privatization
receipts of RWF 23.8 billion) and the inclusion of RWF 259.4 billion of the EURO bond receipts and the
utilisation of part of the receipts under Net Lending. The table below shows a summary of 2012/2013
fiscal projections and outturn.
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
Table 5: Operations of the central government
Fiscal Year 2012/2013
Original
Revised
Actuals
Actuals ( %
Budget
Budget
(billion RWF)
of GDP)
(billion RWF) (billion RWF)
Revenue and grants
Total revenue
Tax revenue
Non-tax revenue
Total grants
Budgetary grants
Capital grants
of which: global fund
Total expenditure and net
lending
Current expenditure
Capital expenditure
Domestic
Foreign
Of which: Global fund
Net Lending
Arrears and other payments
Deficit (cash basis)
Financing
Foreign (net)
Domestic
1,220.6
724.4
641.2
83.2
496.2
252.3
243.9
96.2
1,149.5
707.7
641.2
66.5
441.8
197.9
243.9
96.2
1,101.3
736.4
651.9
84.5
364.9
190.0
174.9
64.3
23.9
16.0
14.2
1.8
7.9
4.1
3.8
1.4
Difference
between
Actual and
Revised
(billion
RWF)
-48.2
28.7
10.7
18.0
-76.9
-7.9
-69.0
-31.9
1,357.8
680.8
647.3
277.0
370.3
96.2
9.8
19.9
-137.1
137.1
128.4
8.7
1,432.9
634.6
625.0
254.8
370.2
96.2
165.3
8.0
-283.6
283.6
355.5
-71.9
1,344.7
633.9
564.5
239.4
325.1
82.6
137.2
9.1
-243.4
243.4
338.6
-95.2
29.2
13.8
12.3
5.2
7.1
1.8
3.0
0.2
5.3
5.3
7.4
2.1
-88.2
-0.7
-60.5
-15.4
-45.1
-13.6
-28.1
1.1
40.0
-40.2
-16.9
-23.3
Source: Budget Execution Report for the FY2012/13, MINECOFIN
2.2.2. Budget implementation
2.2.2.1. Performance of resources
The estimate of total revenue and grants was revised downward to RWF 1149.5 billion in the revised
budget. The downward revision affected both domestic and grants resources. In the case of domestic
resources the revised figure of RWF 707.7 billion reflected the expected reduction of PKO
reimbursements from the UN of RWF 16.7 billion. Regarding the grants figure, this also reflected the
suspension of aid by some bilateral donors. The figure for external loans was also revised upwards from
RWF 143.7 billion to RWF 370.5 billion mainly on account of the addition of the expected inflow of
RWF 259.4 billion from the EURO bonds issuance. At the end of the fiscal year, total revenue and grants
disbursed amounted to RWF 1101.3 billion, or 23.9 per cent of GDP, registering a net shortfall of RWF
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
48.2 billion. Whilst domestic tax revenue collections performed well and exceeded the revised budget
target by RWF 10.7 billion, disbursement of total grants registered a shortfall of RWF 76.9 billion. Both
budget support grants and capital grants contributed to the shortfall.
i.
Domestic resources
Table 6 below shows details of domestic revenue projections and performance in fiscal year 2012/2013.
Table 6: Tax revenue performance in 2012/2013
Tax Categories
Total Tax Revenue
Revised Budget
(billion RWF)
641.2
2012/2013
Actuals
Actuals
( % of
(billion
GDP)
RWF)
651.9
14.2
Difference
(billion RWF)
10.7
Direct Taxes
Companies
Individuals (PAYE)
Others and Property taxes
260
66.1
160.5
33.3
282.0
71.8
174.0
36.2
6.1
1.6
3.8
0.8
22
5.7
13.5
2.9
Taxes on goods and services
Excise taxes
VAT
340.1
121.3
218.8
315.1
111.8
203.3
6.8
2.4
4.4
-25
-9.5
-15.5
41.1
41.1
59.2%
54.8
54.8
57.9%
1.2
1.2
13.7
13.7
6.4%
8.4%
Taxes on International Trade
Import tax
VAT+PAYE as % of Total tax revenue
Taxes on international Trade as % of
total tax revenue
Source: Budget Execution Report for the FY2012/13,, MINECOFIN
Tax revenue
The original tax collection target of RWF 641.2 billion was maintained during the revision of the budget
at the end of 2012 as several on-going administrative measures by RRA as well as some changes in the
tax laws and measures in fiscal year 2012/2013 were expected to allow the achievement of the target.
Total collections for fiscal year 2012/2013 reached RWF 651.9 billion and exceeded the target of RWF
641.2 billion by RWF 10.7 billion. Total tax revenue equaled 14.2 per cent of GDP. Shortfalls in taxes on
goods and services due to the slow-down in economic activity in response to the suspension of aid by the
donors were offset by excess collections under direct taxes and taxes on international trade resulting in
this improved performance in domestic tax collections.
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
In the area of direct taxes, actual collections of RWF 282 billion exceeded projections of RWF 260 billion
by RWF 22 billion, and equaled 6.2 per cent of GDP. Improved collections from PAYE and company
profit taxes contributed to these excess collections. PAYE collections benefitted from an increase in the
number of taxpayers notably from staff hired by NISR for the national census and increased hiring by
Rwandair. Corporate income taxes also benefitted from payments by some previously loss making big
enterprises as well as higher payments by some banks. Furthermore, enforcement of direct taxes arrears
also contributed to the recovery of a large amount of arrears amounting to about RWF 26.3 billion.
Regarding taxes on international trade, the increase in total imports –in value terms – of 16 percent in
FY2012/13 together with a larger than projected depreciation of the Rwandan franc and administrative
reforms in customs procedures in the fiscal year boosted collections during this period. Collections of
RWF 54.8 billion were therefore RWF 13.7 billion higher than the estimate of RWF41.1 billion, and
equaled 1.2 per cent of GDP.
Non tax revenue performance
As indicated above, the original estimate of non-tax revenue collections of RWF 83.2 billion, comprising
RWF 58.7 billion of PKO reimbursements and RWF 24.5 billion of administrative fees and charges, was
revised downward to RWF 66.5 billion on account of the expected reduction in PKO reimbursement
receipts by RWF 16.7 billion. At the end of the fiscal year however, total actual collections amounted to
RWF 84.5 billion, showing an excess of RWF 18 billion over the revised projection and RWF1.3 billion
over the original estimate. Contrary to expectations, reimbursements by the UN for PKO of RWF 61.9
billion were higher than both the original and revised projections and accounted for the excess
performance.
Contributions from administrative fees and charges amounted to RWF 22.6 billion compared to RWF
24.5 billion projected. The shortfall of RWF 1.9 billion was mainly due to the fact that the policy to issue
ID cards to citizens between the ages of 15 and 18 years was not implemented in fiscal year 2012/2013 as
envisaged. As shown above the shortfall was offset by the excess reimbursements from PKO.
ii.
External resources
Table 7 shows details of budgetary grants and loans.
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
Table 7: Budgetary grants and loans (in billion RWF)
2012/2013
2012/2013
2012/2013
Projections
Actuals
Difference
Budgetary Grants
World Bank
68.3
63.5
-4.8
AFDB
34.6
25
-9.6
DFID
39.9
46.7
6.8
EC(EC)
39.5
37.8
-1.7
Germany
0
0
0
Netherlands
0
2.4
2.4
Belgium
0
0
0
15.6
14.7
-0.9
197.9
190
-7.9
Budgetary Loans
AFDB (Agric. Sector Budget Support)
17.4
16.2
-1.2
Total Budgetary Loans
17.4
16.2
-1.2
FTI
Total Budgetary Grants
0
S/Total
Global Fund
215.3
96.2
206.2
64.3
-9.1
-31.9
Total Budget support (Grants and loans)
311.5
270.5
-41
44.6
61.9
17.3
356.1
332.4
-23.7
AU PKO
Total Resources
Source: Budget Execution Report for the FY2012/13, MINECOFIN
Budget grants
With regard to budget support grants, the revised estimate took the suspension of aid by some bilateral
donors into consideration and a reduced estimate of RWF 197.9 billion was therefore made for the fiscal
year 2012/2013. Actual flows amounted to RWF 190 billion, showing a total shortfall of RWF 7.9 billion.
This shortfall was mainly due to exchange rate differentials between original donor currency rates and US
dollars rates.
The table above shows details of donor disbursements to the 2012/2013 budget by donors and type of
support.
In the case of capital grants, the original estimate of RWF243.9 billion was maintained in the revised
budget. This figure comprised of Global fund disbursements of RWF 96.2 billion (US$148.3 million) and
other capital grants of RWF 147.7 billion. On the basis of the July-December 2012 performance, RWF
141.1 billion of disbursements was projected for the January-June 2013 period to achieve the target. This
January-June 2013 estimated figure comprised of RWF 55.6 billion of Global fund receipts and RWF
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
85.5 billion of other capital grants. Total capital grants disbursements in the January-June 2013 period
however amounted to only RWF 72.1 billion. The shortfall in Global fund disbursements amounted to
RWF 31.9 billion whilst that of other capital grants totalled RWF 37.1 billion. As a result of these
shortfalls, total capital grants disbursed in fiscal year 2012/2013 amounted to RWF 174.9 billion as
against RWF 243.9 billion projected. Regarding the other capital grants the shortfall was mainly due to
delays in the disbursement of funds for projects in the energy and roads sectors3.
Loans
The table below gives details of project loans disbursed in FY2012/2013.
Table 8: Project loans (in billion RWF)
Creditor
BADEA
2012/13
2012/13
2012/13
Prov. Actual in
Revised in Rwf Rwf
Difference
10.6
0.1
-10.5
EXIMCHINA
29.5
15.6
-13.9
EXIMINDIA
12.9
12.5
-0.4
FAD
14
19.2
5.2
FIDA
1.6
1.9
0.3
FKWD
7.2
1.4
-5.8
FSD
5.9
--
--
IDA
8.3
28
19.7
36.4
3.6
-32.8
S/Total
Euro Bond
126.4
259.4
82.3
255.6
-44.1
-3.8
G/Total Project Loans
385.8
337.9
-47.9
OPEC
Source: Budget Execution Report for the FY2012/13, MINECOFIN
The revised budget projected total loans of RWF 403.2 billion comprising budget loans of RWF 17.4
billion and project loans of RWF385.8 billion.
Budgetary loans disbursed during the fiscal year came from the AFDB and amounted to RWF 16.2 billion
compared to the estimate of RWF 17.4 billion. The shortfall was due to exchange rate fluctuation between
the donor currency and the US dollar.
Project loans that accrued to the budget amounted to RWF 337.9 billion as against RWF 385.8 billion
showing a shortfall of RWF47.9 billion. Proceeds from the EURO bonds amounted to RWF 255.6 billion
3
We are still experiencing difficulties in obtaining accurate data on capital grants disbursements from the donors. The figures used for this
report are based on BNR cash-flow and imports data. These may not accurately reflect actual performance.
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
(US$ 400 million) registering a small shortfall of RWF 3.8 billion. This was due to the fact that the
proceeds accrued to the budget at a lower than projected exchange rate. In the case of other project loans,
disbursement of RWF 82.3 billion during the fiscal year fell short of the estimate of RWF 126.4 billion by
RWF 44.1 billion. As indicated under capital grants, the shortfall under disbursement of loans was also
mainly due to delays experienced in implementing some infrastructure projects notably in the energy and
roads sectors.
2.2.2.2. Performance of outlays
Total outlays in the revised budget amounted to RWF 1,432.9 billion as against RWF 1357.8 billion in the
original budget. Recurrent spending was reduced from RWF 680.8 billion in the original budget to RWF
634.6 billion whilst capital expenditure was also reduced from RWF 647.3 billion to RWF 625 billion.
These reductions reflect the suspension of aid by some bilateral donors mentioned above. Net Lending
expenditures were increased from RWF 9.8 billion to RWF 165.5 billion to take into account the
expenditures to be funded with the EURO bonds proceeds. These were made up of RWF 51.9 billion
(US$ 80 million) allocated to Rwandair for the early retirement of the expensive loan acquired for the
purchase of the planes and RWF 90.8 billion (US$140 million) to the Kigali Convention Center ( KCC)
also for debt repayment and working capital for the rest of the fiscal year 2012/2013. The remaining RWF
117 billion (US$ 180 million) was to be used by KCC (US$ 130million) and EWASA (US$50 million)
for the construction of hydro dam in FY 2013/14.
In addition to the expenditure cuts, and given the uncertainties concerning the disbursements from the
multilateral institutions last year, the Government decided to earmark some expenditure as ‗contingent
expenditures‘ that could only be spent when the disbursements from the World Bank and AFDB accrue to
the budget. These expenditures amounted to RWF 107.6 billion and were equal to the expected
disbursements from the two institutions. This policy was adopted to safeguard the Government‘s fiscal
policy.
Total spending at the end of fiscal year 2012/2013 however amounted to RWF 1,344.7 billion compared
to RWF 1,432.9 billion in the revised budget. This performance shows a total under-spending of RWF
88.4 billion.
i.
Recurrent spending
Wages and salaries
The original budget allocated RWF 183.1 billion for wages and salaries in fiscal year 2012/2013. As a
result of the suspension of aid and the general cuts implemented by Government, the revised budget
reduced outlays to RWF 178.2 billion on account of freezing all new hiring of all categories of civil
servants (both central Government and districts) including teachers by MINEDUC. Actual spending for
the fiscal year was RWF 168.9 billion indicating a carry-through of the freezing policy.
Goods and services
An amount of RWF 127.6 billion was allocated for goods and services in the original budget. This amount
was reduced to RWF 117.4 billion in the revised budget reflecting the policy to reduce non priority
spending during the fiscal year. The major cuts affected allocations for communications including ICT
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
equipment, public relations expenditure, consultancy services, repair and maintenance expenditure and
allocations for training. Actual spending in the fiscal year however amounted to RWF 123.1 billion
showing an excess spending of RWF 5.7 billion compared to the revised budget estimate. This excess
spending was due to higher outlays for health and education consumables including drugs and dressings
and food for schools and hospitals.
Interest expenditure
The original allocation for interest payments amounted to RWF 18.2 billion. The domestic portion
amounted to RWF 8.2 billion whilst RWF 10 billion was to be used for external interest debt. At end
December 2012, total spending amounted to RWF 10.5 billion, exceeding the estimate of RWF 9 billion
for that period. The excess spending was due to higher domestic interest payment resulting from the
frequent use of the overdraft facility at BNR as well as larger sales of Treasury bills to finance the
financing gap created by the suspension of aid by some bilateral donors mentioned above.
Taking this development into account, the total allocation for interest expenditure in the revised budget
was raised to RWF 28.4 billion showing a rise of RWF 10.2 billion. RWF 2.3 billion was added to the
domestic interest portion raising the allocation from RWF8.2 billion to RWF 10.5 billion. Similarly, the
portion for external interest was raised from RWF 10 billion to RWF 17.9 billion to allow the
Government to pay the first installment of interest on the US$ 400 million EURO bonds.
Total actual spending at end June 2013 amounted to RWF 30.7 billion compared to RWF 28.4 billion in
the revised budget. The excess spending of RWF 2.3 billion observed during July-December 2012 was
again due to frequent use of the BNR overdraft as well as larger sales of Treasury bills by Government.
As a result of this development, total domestic debt which amounted to RWF 249.9 billion (5.3 per cent
of GDP) at end December 2012 rose to RWF 307.6 billion (6.7 per cent of GDP) at end June 2013.
Transfers and subsidies
The original allocation of RWF 266.2 billion was scaled down to RWF 238.2 billion in the revised
budget. Whilst there was an acceleration of spending during the July-December 2012 period mainly due
to the ‗front-loading‘ of subsidies to EWSA for the purchase of fuel and other payments, spending in the
January-June 2013 period decelerated. At end June 2013, total spending for the fiscal year amounted to
RWF 230.8 billion showing an under-spending of RWF7.4 billion. This lower spending was partly due to
some delays in transferring all contributions to some foreign organizations. These were subsequently
honored at the beginning of fiscal year 2013/2014.
Exceptional expenditure
The allocation for exceptional expenditure in the original budget amounted to RWF 85.7 billion. RWF
58.7 billion of this allocation was earmarked for UN peace-keeping operations with an equal amount of
reimbursements expected from the UN during fiscal year 2012/2013. However in course of the year it was
felt necessary to scale down both the expenditure and reimbursements from the UN to RWF 44.6 billion
showing a reduction in both outlays and reimbursements by RWF14.1 billion. As a result of these
expectations, total outlays under exceptional expenditure were reduced from RWF 85.7 billion to RWF
72.4 billion.
At end of the fiscal year, total spending at RWF 80.4 billion exceeded the revised estimate by RWF 8
billion. This excess was partly due to PKO expenditure at RWF49.2 billion being slightly higher than the
revised projection of RWF 44.6 billion by RWF 4.6 billion. Reimbursements from the UN at RWF 61.9
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
billion exceeded the outlays and boosted non tax revenue collections. On this basis there was no extra
burden on the budget. Spending on demobilization at RWF 7.2 billion exceeded the original projection of
RWF 3.9 billion by RWF 3.3 billion and contributed to the excess spending under exceptional
expenditure. Higher spending on repatriated demobilized ex-insurgents from the DRC accounted for this
excess spending. The remaining RWF 24.1 billion was used to finance social expenditures for the
survivors of genocide (FARG).
ii.
Capital expenditure
The original estimate of capital expenditure of RWF 647.3 billion consisted of RWF 277 billion of
domestically financed spending and RWF 370.3 billion to be financed with external grants and loans.
During the revision of the budget to reduce spending on account of the suspension of aid, the allocation
for the domestically financed capital expenditure was reduced by RWF 22.2 billion to RWF 254.8 billion.
The reduction affected mostly new projects that were postponed as well as several on-going projects in
agriculture and infrastructure that were expected to be slowed down. With the externally financed portion
remaining the same as projected, the total allocation for capital expenditure declined to RWF 625 billion
in the revised budget. Total capital spending at end June 2013, however amounted to RWF 564.5 billion.
Both domestically and foreign financed portions contributed to the shortfall of RWF 60.5 billion.
Regarding the externally financed portion of the capital expenditure, implementation during the year
suffered from various delays including delays in processing tender and procurement documents. As a
result, total disbursements of capital grants and project loans slowed down significantly as mentioned
above. This development culminated in foreign financed capital spending of RWF 325.1 billion compared
to RWF 370.2 billion in the revised budget. This performance would have been lower without some
financing from accumulated deposits at BNR. Towards the end of 2012, there were external project
support grants disbursements (including from the Global fund) that could not be used immediately and
therefore accumulated to Government deposits at BNR. These deposits improved the Government‘s
financial position at the end of 2012. A large amount of these deposits comprising RWF 82.6 billion of
the Global fund receipts and RWF 25.9 of other capital grants, were used to implement various projects
especially in the January-June period, when the budget experienced lower external flows for projects. In
the case of the domestically financed capital budget, implementation improved significantly during the
January-June 2013 period. As a result, of this performance, total spending in the fiscal year amounted to
RWF 239.4 billion compared to the revised estimate of RWF 254.8 billion and registered a shortfall of
only RWF15.4 billion. As mentioned above, delays in implementing some infrastructure projects notably
in the energy and roads sectors accounted for the lower spending on projects.
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
iii. Net lending
The original estimate of RWF 9.8 billion was revised upwards to RWF 165.3 billion. The major items
leading to this upward revision of the estimate figure were to provide RWF 51.9 billion (US$80 million)
to Rwandair to repay expensive loans for planes and provide RWF 90.8 billion (US$ 140 million) to the
Kigali Conference Center (KCC) also for repayment of loans and for construction work till end June
2013. Government was to lend the two companies these funds from the proceeds of the EURO bond.
Total spending at end June for fiscal year 2012/2013 amounted to RWF137.2 billion showing lower
spending of RWF28.1 billion compared to the revised estimate of RWF 165.3 billion.
In the case of implementation, KCC paid debt of RWF 59.4 billion (US$ 93.3 million) and used only
RWF3.4 billion (US$ 5.2 million) for construction work during the January-June 2013 period. These
actions resulted in lower spending by RWF28 billion for the fiscal year and represented the shortfall in
spending under Net Lending. Concerning Rwandair, the expected debt payments of US$ 80 million
equivalent to RWF 51.2 billion was made using the proceeds from the EURO bonds to CITIBANK and
PTA bank.
Box 1: Privatization
The Government of Rwanda received approximately RWF 7.43 billion in privatization receipts from
planned sources in FY 2012/2013. Privatization aims to improve competitiveness, reduce the financial
and administrative burden to the state, and boost entrepreneurship in Rwanda. Some receipts are still
pending, so the full amount for the year is expected to be higher than this (approximately RWF 12 billion)
but is still down on the previous fiscal year (RWF 32.5 billion). The majority of the received funds came
from the privatization of Mulindi Tea Factory and Shagasha Tea Factory. Unplanned assets which were
privatized in the same period include shares in Magasins Généraux du Rwanda (worth USD 650,000) and
Savannah Dairy (which had a purchase price of RWF 273,000,000).
Planned assets to be privatized in FY2013/14 include Rubilizi National Hatchery (RWF 1.09 billion) and
Rwanda Printing and Publishing Company (RWF 1.9 billion).
iv.
Arrears accumulation and payments
The cash-flow problems resulting from the suspension of aid by some bilateral donors and delays in
disbursements by others have been highlighted earlier in the report. These actions took place particularly
during the July-December 2012 period. As a result of these developments and with the objective of not
‗crowding out‘ the private sector, Government‘s use of the domestic financial market to close the resource
gap was constrained. Consistent with this policy, there were therefore delays by Government in
processing and paying all bills on time. Thus at end December 2012, RWF 34.4 billion of unpaid payment
orders (float) had accumulated at the Treasury. These refer to payment orders that were more than 14 days
old. At the beginning of 2013 and especially as the delayed disbursements from the donors accrued, these
accumulated bills were paid. As at end June 2013, total arrears payments amounted to RWF 9.1 billion.
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
2.2.2.3 Financing of the 2012/2013 budget
The revised deficit of RWF 283.6 billion was to be financed with net external loans of RWF 355.5billion
which would allow the net domestic accumulation of banking sector deposits of RWF 71.9 billion at
BNR. This amount by and large represented the balance of unused proceeds from the EURO bonds at end
June 2013. On the basis of all the resource flows and outlays highlighted above, the budget closed the
fiscal year at end June 2013 with an overall cash deficit amounting RWF 243.4 billion, RWF 40.2 billion
lower than the revised budget estimate of RWF 283.6 billion. This deficit equaled 5.3 per cent of GDP.
With net foreign loans inflow of RWF 338.6 billion, the deficit was not only fully financed but these
funds allowed a surplus net accumulation of domestic banking deposits of RWF 95.2 billion .This
performance was achieved despite the shortfall in external resources. It is the result of on the one hand
outlays being lower—as non-priority spending was reduced and in some cases implementation of some
capital projects was delayed—and on the other hand the lower spending by KCC. However in terms of
domestic finance, the Government also increased its domestic debt through the use of the overdraft at
BNR which reached RWF 49.2 billion at end June 2013 as well as sales of Treasury bills and bonds to
both banks and non-banks with the share of the non banking sector amounting to RWF 39.7 billion
thereby increasing the domestic debt of Government.
To sum up, the implementation of the 2012/2013 budget faced several problems of resources due to the
suspension of aid by some donors and in some cases delays in disbursing commitments. To ensure sound
macro-economic management, the Government cut spending to the tune of the aid suspension amount and
also slowed down the implementation of some projects including some priority ones. However, sustaining
spending especially priority outlays has not been without costs. Increased domestic borrowing led to
higher interest costs and constrained liquidity in the economy resulting in lower credit to the private sector
during the second half of 2012 and beginning of 2013. Furthermore, the loss in foreign exchange led to a
higher than expected depreciation and increased domestic costs.
2.3. External sector performance
2.3.1. The overall balance of payments
The balance of payments recorded a deficit of US$212.4 million at the end of 2012, compared to a surplus
of US$234.5 million at the end of 2011. The deficit was caused by increased imports, which increased the
current account deficit, and the postponement of certain donor budget support funds from 2012 to 2013.
Usually the surplus in the capital and financial accounts offsets the deficit in the current account; 2012
was the first year since 2003 when this did not happen, resulting in an overall Balance of Payments deficit
for 2012.
The overall balance of payments for the fiscal year can be approximately calculated, however, as it equals
the change in the NBR‘s net foreign assets. This was $US 245.4 million when comparing June 2013 to a
year previously (see Figure 11). This increase was mainly a result of the accumulation of the unused
EURO bond proceeds on the government account in the central bank at the end of June 2013.
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
Figure 11: the Balance of Payments and Changes in Net Foreign Assets
400
300
245.4
USD million
200
91.6
100
0
-100
Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13
-200
-300
Balance of Payments (end-Dec)
Change in Net Foreign Assets
Note: the Monetary Survey data were converted to USD using end-period exchange rates. The difference between the recorded Balance of
Payments (red bars) and the change in Net Foreign Assets (blue line) can be attributed to valuation effects (changes in asset prices and
exchange rates).
2.3.2. Trade balance
The trade deficit increased by 5 per cent in FY2012-2013, from US$ 1,271 million to US$ 1,334 million
(see Table 9).4 This deterioration is smaller than in recent years because of the behavior of imports in the
second half of the year, when their growth slowed down quite noticeably when compared to the same
period a year ago.
Although exports grew faster than imports in FY 2012-2013 (42 per cent compared to 16 per cent),
imports account for far more trade than exports.
Exports covered 36 per cent of imports in FY2012-2013. This compares very well to 29 per cent in
FY2011-2012 (see Figure 12 also).
4
Looking at exports and imports on a value basis (USD million) includes the effects of foreign prices, exchange rate
movements and volume. Volumes indicate ‗real‘ changes but the value figures indicate the change in the balance of payment
(BoP) position. The BoP is usually compiled on a calendar year (CY) basis. In converting it to fiscal year, this report
constrained the monthly data (January – December) to equal the CY BoP for both exports and imports. The constraining was
done on a pro-rata basis.
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
Table 9: The trade balance in value terms
Exports (f.o.b), of which:
Coffee
Tea
Minerals
Non-traditional
2011-2012
(USD million)
519
94
74
179
76
2012-2013
(USD million)
738
87
82
242
122
Change
(per cent)
42
-8
11
35
60
Imports (f.o.b), of which:
Consumer goods
Capital goods
Intermediary goods
Energy goods
1790
490
477
503
320
2071
608
537
577
349
16
24
13
15
9
-1271
-1334
5
Trade balance
Source: BNR
Note: the totals for import and exports (f.o.b., USD) account for adjustments found in annual Balance of Payment statements, in order
to maintain consistency with the calendar year data.
Table 10: The trade balance in volume terms
Exports (f.o.b), of which:
Coffee
Tea
Minerals
Non-traditional
2011-2012
(1000 ton)
214
17
22
9
122
2012-2013
(1000 ton)
321
21
22
8
181
Change
(per cent)
50
23
-1
-5
49
Imports (f.o.b), of which:
Consumer goods
Capital goods
Intermediary goods
Energy goods
1481
500
59
687
235
1775
599
61
855
260
20
20
4
24
10
-1267
-1453
15
Trade balance
Source: BNR
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
USD million
Figure 12: comparing exports and imports by each fiscal half year
400
40%
200
38%
0
36%
-200
Jul-Dec 2011 Jan-June 2012 Jul-Dec 2012 Jan-June 2013
34%
-400
32%
-600
30%
-800
28%
-1,000
26%
-1,200
24%
Exports (fob)
Imports (fob)
Imports coverage (%, RHS axis)
Source: BNR
2.3.2.1. Exports
In both value and volume terms, non-traditional exports (like cereals) grew fastest. Although they
represent over half of all exports on a volume basis, they still only accounted for 16 per cent of export
value in 2012-2013 (see Figures 13 and 14). Minerals, by contrast, were only 3 per cent of exports by
volume but represent a third of total export value (see Figures 13 and 14). This is due to rising prices for
coltan in particular. The value of coffee exports notably declined as the global price fell in this period
compared to the last fiscal year. The second half of the fiscal year was much weaker as coffee export
growth contracted by 55 per cent compared to the first half.
Figure 13: exports by value (US$ million) in FY 2012-2013
12%
28%
Coffee
11%
Tea
Minerals
Non-traditional
16%
33%
Other (mainly re-exports)
Source: BNR
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
Figure 14: exports by volume (kg) in FY 2012-2013
6%
7%
3%
Coffee
28%
Tea
Minerals
Non-traditional
Other (mainly re-exports)
56%
Source: BNR
2.3.2.2. Imports
Comparing fiscal year with fiscal year, there was a 16 per cent increase in the value of imports and a 20
per cent increase in volume. The value change was driven by consumption goods (which contributed 7
percentage points to total growth) whereas intermediate goods drove the volume change (with an 11
percentage point contribution to total growth).
However, for both consumption and intermediate goods, growth contracted over the course of the fiscal
year (i.e. imports were greater in the first than the second half of the year). Growth in capital goods
slowed down considerably in the second half of the fiscal year (see Figure 16), and this is particularly
worrying for what it signifies for business investment in the next few quarters.
Figure 15: imports by value (USD million) in FY 2012-2013
17%
29%
Consumer goods
Capital goods
Intermediary goods
28%
Energy goods
26%
Source: BNR
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
Figure 16: import growth (H2/H1) over the fiscal year
25%
20%
15%
10%
FY 2011/12
5%
FY 2012/13
0%
-5%
-10%
Source: BNR
Note: growth is calculated as the percentage change in the second half of the fiscal year compared to the first half.
Box2: Largest foreign exchange earners: tourism and remittances
Tourism continues to be an extremely strong sector in the Rwandan economy. Tourism receipts
increased by 13 per cent to USD 296.4 million between FY 2012-13 and FY2011-12. Note this
figure equals 40 per cent of total exports (in USD), making tourism the largest foreign exchange
earner in Rwanda. The year-on-year increase was driven by receipts from leisure (6 percentage
points of the increase).
Overall numbers of visitors to the country increased by 16 per cent between the two fiscal years.
The largest group came for business purposes, although they are not the biggest spenders (they only
contributed 3 percentage points to the 13 percent increase in revenue). The increase in revenue, and
in particular the increase in revenue from leisure sources, highlights the continuing success of
Rwanda‘s tourism strategy. The mountain gorillas continue to be a big draw, although the increase
in the cost of a permit was associated with a drop in numbers to Volcano National Park. However,
the price increase was such that total revenue in the first half of 2013 was actually greater than the
first half of 2012.
Tourism visitors and revenue by fiscal year
Visitors (million)
Revenue (USD million)
Macroeconomic Policy Unit
FY 2011/12
0.99
262.3
FY 2012/13
1.14
296.4
% change
16
13
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
2.3.3. External debt developments
2.3.4.1 Debt outstanding at end June 2013
Rwanda‘s stock of foreign and domestic debt was on the rise by end June 2013. It increased by US$525
million (in absolute terms) from US$ 1,638 billion at end June 2012, to US$ 2,163 billion at end June
2013. This represents 30.2 per cent of GDP in June 2013, up from a level of 23.0 per cent at end June
2012.The share of foreign loans in the outstanding debt increased from 67.7 per cent in FY 2011/12 to
71.6 per cent in FY 2012/13, and the size of domestic loans decreased from 32.3 per cent to 28.4 per cent.
However, both foreign and local denominated debt increased (as a share of GDP) to 21.6 per cent and 8.6
per cent respectively.
Box3: Debut Bond Issuance
The increase in external debt was partly accounted for by a debut bond, which was successfully issued
in April 2013 (with an oversubscription rate of eight times higher the issued amount), signaling
investors‘ confidence in Rwanda‘s overall macroeconomic management. The proceeds of the bond were
earmarked to: (i) repayment of existing loans of Rwandair and Kigali Convention Center (KCC); (ii) the
completion of the KCC‘s construction; and (iii) the Nyabarongo hydro power plant.
The increase in domestic debt was attributed to higher T-bills issued in June 2013, (RWF 158 billion
against RWF 101.5 billion as of end June 2012) as a result of delays in donor disbursements. Table 12
sets out information regarding Rwanda‘s public debt for the periods indicated.
Table 11: Rwanda Public & Publicly Guaranteed Debt (million USD)
Jun-12
% of
GDP
Total (External + Domestic)
External Debt
Government
Multilateral
IMF
IDA
ADB
Other Multilateral
Official Bilateral
Paris Club
Non-Paris Club
Commercial
of which : euro bond
Guaranteed by the Govt
Domestic Debt
In billion Rwf
Of which: Short-term
Nominal GDP in billion Rwf
Nominal GDP in million USD
Exchange rate
Macroeconomic Policy Unit
1,638.0
1,109.0
1,006.0
841.7
13.6
401.1
228.9
198.1
164.4
1.4
163.0
0.0
103.1
528.8
337.8
101.5
4,363.0
7,124.0
612.4
23.0
15.6
14.0
11.8
0.2
5.6
3.2
2.8
2.3
0.0
2.3
0.0
0.0
1.4
7.4
Jun-13
Share of
total debt
(%)
100.0
67.7
61.0
51.4
0.8
24.5
14.0
12.1
10.0
0.1
10.0
0.0
0.0
6.3
32.3
% of
GDP
2,163.1
1,549.6
1,501.0
895.2
12.0
435.5
250.9
196.8
206.2
0.0
206.2
400.0
400.0
48.2
613.5
397.8
30.2
21.6
21.0
12.5
0.2
6.1
3.5
2.7
2.9
0.0
2.9
5.6
5.6
0.7
8.6
Share of
total debt
(%)
100.0
71.6
69.0
41.4
0.6
20.1
11.6
9.1
9.5
0.0
9.5
18.5
18.5
2.2
28.4
4,606.0
7,167.0
642.7
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
2.3.4.2. External debt servicing
Rwanda‘s external debt service reached a level of USD 131.1 million by end June 2013, (10.8 per cent of
exports of Goods and services, see Table 13). The largest share of the servicing was for repayment of
existing debt owed to PTA and Citi Bank, which was contracted on expensive terms.5
Table 12: debt servicing in 2011/12 and 2012/13
2011/12
24.8
2012/13
131.1
16.2
113.6
Interest Payment
Total Debt Service (% of Exports of G&S)
8.7
2.6
17.5
10.8
Principal Payment
1.7
9.3
Interest Payment
0.9
1.5
Total Debt Service (million USD)
Principal Payment
2.3.4.3 Debt sustainability analysis (DSA)
A comprehensive debt sustainability analysis (DSA), based on a 20-year horizon, revealed that Rwanda‘s
debt outlook is quite sustainable from 2014 (first year of projection), with a low risk status; this indicates
an improvement in Rwanda‘s risk of debt distress from ―moderate‖ to ―low‖, as a result of changes to the
debt sustainability framework (see Figure 18 below).6 Table 14 sets out the evolution of debt ratios going
forward.
Table 13: the evolution of Rwandan debt ratios
Indicators
PV of debt-to GDP ratio
NPV of Debt to exports ratio
PV of debt-to-revenue ratio
2014
16.7
101.7
97.0
2015
17.4
109.3
90.8
2016
17.3
109.8
89.8
2017
16.7
108.9
90.4
2022
10.7
80.3
68.7
2023
8.0
60.7
51.7
2024 Thresholds
7.8
50
59.0
200
50.1
300
The NPV of debt-to-export ratio is projected to gradually increase over the medium term (3 years) from
101.7 per cent to 108.9 in 2017, before decreasing to a level of 59 per cent in 2024. The servicing of the
debt to exports ratio remains below the indicative threshold of 25 per cent, falling from 8.3 per cent to 7.8
per over the medium term. However it is projected to significantly rise to 18.6 per cent in 2023, as a result
of maturing euro bond (see Figure 19).
The analysis also explored potential vulnerability to exports, such as lower nominal export growth, but
also other economic and fiscal shocks, like lower economic growth and a temporary increase in
development expenditure through unfavorable new borrowings. As a conclusion, Rwanda‘s debt
5
Debt repayment to PTA and Citi Bank includes a loan acquired for the purchase of airplanes by Rwanda Air ($ 80m) and a
loan acquired for the construction of the Kigali Convention Center ($93.3m).
6
The DSA is a tool developed by the IMF and World Bank, which is used by MINECOFIN for debt monitoring.
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
sustainability is ―fairly‖ robust to most shocks except to a shock on export growth with a magnitude of 10
per cent. However, the probability of such a scenario occurring is very low.
The results of the stress test indicate that in the worst case scenario, a decrease of 10 per cent in export
growth in 2014 and 2015 would magnify the risk of debt distress by 19.3 per cent and 54.5 per cent in
2015 and 2016 respectively. However, on-going investments in mining as well as in the non- traditional
exports areas (especially the horticulture sector) in the short run would expand the export base and
mitigate the risks of debt distress in the event of temporary shocks to export growth.
Box 4: Recent changes in debt sustainability framework
In March 2013, the Bank and Fund staffs proposed that a unified discount rate would be set to 5 per
cent, 200 basis points higher than the previous rate of 3 per cent. This rate should be used until the next
review of the debt sustainability framework in 2015.
It was set by reference to the 10-year average U.S. dollar commercial interest reference rate (CIRR)
plus a margin of 1.15 percent (the latter is calculated by the OECD and reflects a premium for loans
with a maturity longer than the bond yields, typically five-year bonds used in the CIRR calculations).
Discount rates are used by the Bank and the Fund to: (i) calculate the present value (PV) of the
external debt of low-income countries (LICs) in debt sustainability analyses (DSAs) and (ii) calculate
the grant element of individual loans.
The use of 5 per cent instead of 3 per cent improves the PV ratios for Rwanda‘s external debt,
upgrading the distress status, from moderate to low. This also means a broadening of the borrowing
space available to Rwanda, under the Fund‘s debt limits policy, and in the Bank‘s Non-Concessional
Borrowing Policy.
The debt sustainability analysis was based on five years rolling estimates of Rwanda‘s Medium Term
Macroeconomic Framework 2013-17. Forecasts were extended to a further fifteen years up 2034.The real
GDP growth rate was projected to increase by 7.5 per cent on average over the medium term before
falling to 6 and 5 per cent in the long run. This suggests that economic growth going forward will be led
by exports of goods and services. The latter were projected to increase from 14.3 per cent of GDP to 19.1
per cent of GDP by 2034, as a result of continuous efforts made in the promotion of non- traditional
exports, but also new investors in the mining sector.
On the other hand imports would remain high due to ongoing strategic investments, and therefore lead to
a current account deficit, which will take longer than expected before narrowing. Fiscal assumptions took
into account an increase in domestic revenues to GDP from a level 15.2 per cent of GDP in 2012 to 22.2
per cent of GDP in 2034.
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
Figure 17: various charts from the DSA
a. Debt Accumulation
10
50
45
8
40
6
35
4
30
2
20
25
b.PV of debt-to GDP ratio
60
50
40
30
15
0
-2 2014
2019
2024
2029
2034 10
5
-4
0
20
10
0
Rate of Debt Accumulation
Grant-equivalent financing (% of GDP)
2014
Grant element of new borrowing (% right scale)
c.PV of debt-to-exports ratio
250
2019
2024
2029
2034
d.PV of debt-to-revenue ratio
350
300
200
250
150
200
150
100
100
50
50
0
0
2014
2019
2024
2029
2034
e.Debt service-to-exports ratio
2014
2019
25
20
20
15
15
2029
2034
f.Debt service-to-revenue ratio
25
30
2024
10
10
5
5
0
0
2014
2014
2019
2024
Macroeconomic Policy Unit
2029
2034
Baseline
2019
2024
2029
2034
Historical scenario
- 34 -
RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
2.4. Monetary and financial sector performance
2.4.1. Monetary sector developments
2.4.1.1. Money supply
Broad money increased by 9.2 per cent during FY2012/13. This owed mainly to the increase in Net
foreign assets which increased by 25.1 per cent over the fiscal year. This was a result of the unused
Eurobond proceeds which remained on the government account in the central bank till June 2013. This
accumulation of the deposit of the government in the central bank resulted in the reduction of the net
credit to the government of 276.6 per cent during the fiscal year 2012/2013. This high reduction of the net
credit to the government was the main cause of the decrease in Net domestic assets which decreased by
13.0 per cent over the fiscal year.
Table 14: Monetary aggregates
Percentage change
Rwf, billions
June 12 -
Dec 12 -
Jun 12 -
June-12
Dec-12
June-13
Dec 12
Jun 13
Jun 13
Net foreign assets
513.7
555.8
642.8
8.2
15.6
25.1
Net domestic assets
Credit to private sector
366.2
606.1
334.1
682.5
318.5
717.0
-8.8
12.6
-4.7
5.1
-13.0
18.3
Credit to government
-52.2
-137.2
-196.6
-162.8
-43.3
-276.6
Broad money
Current in circulation
880.0
111.6
889.9
107.0
961.3
116.3
1.1
-4.1
8.0
8.7
9.2
4.2
768.4
782.9
845.0
1.9
7.9
10.0
Deposit
Source: BNR (data correct as of end-October 2013)
Credit to the private sector expanded 18.3 per cent in line with dynamic economic activity recorded
during the fiscal year. In the second half of 2012 credit to the private sector increased substantially, driven
by a higher dynamism in economic activities, mainly construction, manufacturing and services sectors,
but they slowed down during the first half of 2013 due mainly to the lagged effect of the aid delays and
accumulation of the non-performing loans in the banking system. Slowing credit growth was also
explained by low domestic demand associated with lower Government spending in the first half of 2013.
Low credit growth can also be attributed to several other factors. First, with their balance-sheet impaired
by rising non-performing loans (NPLs), commercial banks have become reluctant in extending further
credit to a decelerating domestic economy. The NPL ratio increased from 6.0 per cent in December to 6.9
per cent in June 2013 (see Table 17). Second, credit activity remained subdued as banks have been more
attracted by the higher rate of Treasury bills as an alternative to lending to the private sector.
This has led the central bank to ease monetary policy in June 2013 by reducing the Key Repo Rate from
7.5 per cent to 7 per cent.
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
2.4.1.2. Exchange rate developments
Regarding the exchange rate policy, BNR kept the RWF exchange rate fundamentally market driven,
while intervening on the domestic foreign exchange market by selling foreign exchange to banks to
smoothen the RWF exchange rate volatility. As shown in Figure 20, this was successful in keeping the
RWF somewhat stable against the USD, depreciating 4.9 per cent over the fiscal year. The spread
between official and forex bureau rates peaked in early 2013 due to higher demand for imports and the
shortfall in donor funding. However, this spread has narrowed since May 2013 following improved
foreign aid inflows and the successful issuance of the debut Rwanda euro bond. The Rwandan Franc
experienced a more volatile exchange rate against both the Euro and GBP, with the RWF depreciating
10.0 per cent and 3.2 per cent against the Euro and GBP respectively over the fiscal year. The RWF
remained relatively stable against EAC currencies with mild depreciation against the KES and TZS and
mild appreciation against the BIF and UGS.
Figure 18: exchange rates (normalized to 1 at the start of the fiscal year to show percentage changes)
b) EAC currencies
a) OECD currencies
EUR
GBP
KES
UGS
TZS
Jun-13
May-13
Apr-13
Mar-13
Feb-13
Jan-13
Dec-12
Nov-12
Oct-12
Sep-12
Aug-12
Jun-12
USD
Jul-12
1.15
1.1
1.05
1
0.95
0.9
1.15
1.1
1.05
1
0.95
0.9
BIF
2.4.1.3. Interest rate developments
From May 2012 till mid-June 2013, BNR maintained a tight monetary policy stance amid a relatively
stable macroeconomic environment. Following low inflationary pressure in Rwanda‘s trading partners,
easing pressure on foreign exchange markets compared to 2012 and concerns about decelerating private
credit growth led the Central Bank of Rwanda (BNR) to slightly ease monetary policy by cutting the key
repo rate from 7.5 per cent to 7 per cent on June 18th 2013. With the cut in BNR policy rate, almost all
interest rates have declined at the end of June 2013 (see Table 16). Short-term interest rates remained
fairly stable throughout the year, and increased in line with the policy rate. The interbank rate increased
from 9.09 per cent in July 2012 to 11.11 per cent in May and 9.58 per cent in June 2013 following the
monetary policy easing. The treasury bills weighted average increased from 9.85 per cent to 11.98 per
cent in May and to 10.81 per cent in June 2013. Regarding market rates, the lending rate has increased by
113 basis points between July 2012 and June 2013 from 16.52 per cent percent to 17.65 per cent.
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
Table 15: Interest rate developments
Jul12
Aug12
Sep12
Oct12
Nov12
BNR policy rates
key repo rate
7.50 7.50 7.50 7.50 7.50
discount rate
11.50 11.50 11.50 11.50 11.50
Money market rates
Repo rate
7.37 7.34 7.45 7.30 7.50
Treasury bills
rate
9.85 11.12 12.28 12.07 12.38
Commercial banks
Interbank rate
9.09 9.52 10.82 10.88 11.90
Deposit rate
8.85 8.64 8.46 9.24 11.15
Lending rate
16.52 17.08 17.14 16.61 16.65
Dec12
Jan13
Feb13
Mar13
Apr13
May13
Jun13
7.50 7.50 7.50 7.50 7.50 7.50 7.00
11.50 11.50 11.50 11.50 11.50 11.50 11.00
7.46
7.44
7.36
7.00
7.23
7.08
6.68
12.39 12.36 12.20 12.13 12.03 11.98 10.81
11.12 11.11 10.40 10.03 10.86 11.11 9.58
10.69 11.30 10.32 10.38 10.67 11.55 10.61
16.49 17.09 17.14 17.17 17.27 17.56 17.65
Source: BNR
NBR undertook measures to improve the efficiency of its money market operations. In February 2012,
BNR introduced a fixed REPO maturity of seven days in place of various maturities; also from June 1st
2012 reserve requirements are now constituted only in local currency and the maintenance period was
extended to two weeks from one week in the perspective of supporting the averaging system. In addition,
the standing deposit and lending facilities were introduced on June 1st 2012.
2.4.2. Financial sector developments
The financial sector remained sound and stable in 2012/13 as shown by the financial soundness indicators
of the banking system, measured in terms of capital adequacy, earnings, asset quality and liquidity.
The Central Bank of Rwanda (BNR) also continued to implement its financial reforms to ensure that the
financial system remains sound and stable. Some of the reforms implemented during this period include
the establishment of an efficient legal and regulatory framework, supervisory tools, modern payment
systems and the private credit reference bureau.
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
Table 16: Key financial stability indicators for the banking system (percentages)
Solvency ratio (Total capital/ RWA)
NPLs/ Gross loans
NPLs-net/ Gross loans
Provisions/ NPLs
Earning assets/ Total assets
Large exposures/ Gross loans
Return on average assets
Return on average equity
Cost of deposits
Liquid assets/ Total deposits
Forex exposure/ Core capital
2011
Dec
27.2
8.0
7.0
50.8
77.2
9.8
2.2
10.6
2.4
45.3
6.6
2012
March
26.6
6.5
5.3
51.5
80.0
7.7
2.5
11.9
2.8
49.4
4.9
June
25.1
5.8
4.2
51.1
81.4
9.5
2.2
10.6
2.8
47.2
-1.5
Dec
23.9
6.0
5.4
53.7
79.9
9.1
2.2
10.4
2.9
41.2
-0.6
2013
March
24.6
6.7
5.9
49.0
80.6
8.4
2.5
11.9
3.5
40.5
-1.1
June
23.1
6.9
3.2
54.8
80.8
8.0
2.1
9.9
3.5
46.2
-2.8
Source: BNR
As shown in Table 17, the solvency ratio on a consolidated basis decreased from 25.1 per cent in June
2012 to 23.1 per cent in June 2013. All banks complied with the capital adequacy ratio of 15 per cent. The
ratio of non-performing loans (NPLs) to gross loans increased from 5.8 per cent in June 2012 to 6.9 per
cent at end June 2013, remaining above 5 per cent which was set as threshold for each bank starting from
the second quarter 2012. During the 2012/13 fiscal year banks‘ profitability ratios deteriorated: in June
2013 the annualized average return on assets (ROA) and the average return on equity (ROE) ratios were
2.1 per cent and 9.9 per cent compared to 2.2 per cent and 10.6 per cent a year earlier.
Pertaining to liquidity, almost all banks registered a comfortable liquidity level during the fiscal year of
2012/2013. The banking sector registered a slight decrease in liquidity position with overall liquid assets
to deposits ratio of 46.2 per cent at the end of June 2013 compared to 47.2 per cent at end June 2012.
2.5. Regional integration
2.5.1.
Progress to date
Rwanda has identified regional and international economic integration as the sixth pillar of Vision 2020, a
key element for its long term development path. Rwanda is a full member of three key regional economic
blocks: the East African Community (EAC), the Common Market for Eastern and Southern Africa
(COMESA), and the Economic Community of the Great Lakes Countries (CEPGL). These blocks are at
different stages of development and Rwanda is currently dealing with a tripartite agreement including the
EAC, COMESA and the Southern African Development Community (SADC) with the purpose of
resolving issues surrounding overlapping membership.
In terms of regional integration, the EAC is at the most advanced stage, and Rwanda has significantly
deepened its integration with the EAC. Currently, two stages of the process, the customs union (since July
2009) and common market (since July 2010) protocols, are being implemented and allow people, capital
and goods to move freely within the EAC without restriction. The protocol for the final stage, the East
African Monetary Union, was signed by leaders in November 2013, and Rwanda is expected to benefit
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
from this by the reduction of transaction costs for businesses, thereby improving the incentive to invest in
Rwanda. In addition, negotiations are in place to implement a single tourist visa and single customs
territory which would benefit Rwanda through increased tourism and customs revenues.
Under trade in services negotiations, Rwanda has committed four sectors with COMESA, including
tourism, financial services, transport and communication; and those sectors have been submitted to the
COMESA secretariat and are expected to be reviewed in February 2014. Rwanda currently benefits from
the COMESA Free Trade Area, which it joined in 2004, and the COMESA Customs Union is currently in
the process of being implemented. Whilst some progress has been achieved since the launch in 2009, none
of the members has yet fully implemented the COMESA Customs Union. Currently, negotiations for the
harmonization of COMESA and EAC Common External Tariffs are underway which will form the
customs union of the two regions. The transition period has been extended for two more years (until
2014) to allow for this.
2.5.2.
Trade with the EAC
In FY2012/2013 trade within the EAC region significantly expanded due to a reduction in import tariffs,
reduced non-tariff barriers and more efficient border controls. Exports to the EAC have grown
significantly faster than exports to the rest of the world. Rwandan exports to the EAC increased by 99 per
cent, whilst imports from the EAC decreased by 4 per cent in 2012/13 compared to the previous fiscal
year. Major exports to the EAC include tea and coffee (Mombasa auction), hides and skins, iron and steel.
Table 17: Trade with the EAC
2011Q3
2011Q4
2012Q1
2012Q2
2012Q3
2012Q4
2013Q1
2013Q2
Rwanda's exports to EAC Partner States in millions USD
Burundi
Kenya
Tanzania
Uganda
EAC
1.52
2.61
1.90
2.30
2.10
3.20
2.90
2.40
13.88
18.99
41.60
13.40
15.80
15.00
15.70
14.80
0.14
0.34
25.10
32.40
54.20
50.00
34.20
58.10
0.83
2.26
4.80
13.20
19.00
18.20
22.70
21.10
16.37
24.20
73.40
61.30
91.10
86.40
75.50
96.40
2011Q3
2011Q4
2012Q1
2012Q2
2012Q3
2012Q4
2013Q1
2013Q2
Imports of Rwanda from EAC Partner States in millions USD
Burundi
1.0
0.5
6.6
1.4
2.0
0.9
1.0
1.8
Kenya
31.7
30.4
34.2
33.2
37.0
30.4
27.1
30.1
Tanzania
19.9
13.8
21.7
19.3
19.8
14.2
14.0
14.7
Uganda
52.3
47.7
49.5
58.3
60.4
55.9
45.3
49.5
104.9
92.4
112
112.2
119.2
101.4
87.4
96.1
EAC
Source: NISR
Since the first quarter of 2012, Rwanda has started to export coffee, tea, mate and spices through Dar Es
Salaam port which was not the case before. Ores, slag and ash contributed to the increase of exports to
Tanzania that have been also exported through Dar Es Salaam starting from the first quarter of 2012. In
addition to that, exports of iron and steel have increased by 129 percent in two last quarters of 2012/13
compared to the two fist quarters of the same year.
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
III. ECONOMIC OUTLOOK FOR 2013-14
3.1. Real sector
High economic growth is expected to continue in 2013/14 driven by a recovery of agriculture influencing
industry and services sectors. Inflation is projected to remain below 5 percent on average for next fiscal
year.
Risks to growth are coming from the constrained forex availability, contracting imports growth.
Economic growth may also be adversely affected by sluggish private sector credit growth, a lean harvest
from 2013 Season B, all of which could dampen consumption growth.
3.2. Fiscal policy
The main objectives of fiscal policy are to increase revenue mobilisation as well as to allocate additional
resources for both recurrent and capital expenditure to achieve the key aim of EDPRS II to accelerate
poverty reduction whilst generating sustainable and inclusive growth.
For 2013/14 fiscal year, total revenue and grants are estimated at RWF 1,323.6 billion which shows an
increase of 20 per cent compared to the 2012/13 outturn. Expenditure is forecast at RWF 1,584 billion, a
19 per cent increase on FY2012/13. This will result in a budget deficit of RWF 266.9 billion, a ten per
cent increase on FY2012/13. The deficit is due to the intention of the government to increase capital
spending in key priority sectors identified in EDPRS II and meet its required development targets. With
regard to financing the deficit, no budgetary loans have been budgeted for 2013/14, in line with efforts to
increase domestic revenue collection. Instead, it will be covered mainly by project loans, drawdown of
domestic reserves and domestic borrowing.
3.3. Monetary policy
Net foreign assets are expected to decline from their current high to RWF 524.0 billion by end June 2014.
Net domestic assets will increase to RWF 560.5 billion, as the Government increases domestic borrowing.
Over the medium term, the BNR will aim to achieve an annual average core inflation rate of 5 per cent.
One near-term risk is that credit growth to the private sector continues to slow in FY2013/14. This will
have implications for domestic demand.
3.4. External sector
By the end of 2013, the trade balance is expected to widen to RWF 1,809.4 billion from RWF 1,376.2 at
end-2012. Over this time period, imports are projected to grow 26 per cent while exports will grow 14 per
cent.
Macroeconomic Policy Unit
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RWANDA Annual Economic Report
Ministry of Finance and Economic Planning (Date: 18/12/13)
Fiscal Year 2012/2013
CONCLUSION
There were a number of key developments in the Rwandan economy over FY 2012-13. The suspension of
aid dominated the fiscal sector story and to a certain extent also the real sector through its effect on
consumption and credit growth.
A milestone in the country‘s economic history was reached with the issuance of the euro bond in May
2013. This impacted on the monetary sector with the consequent increase in net foreign assets and of
course the external sector via the financial account.
Rwanda continued its efforts at fiscal consolidation by improved revenue collection. Fiscal responsibility
was highlighted by the fact that the budget deficit in the aftermath of the aid cuts was not as bad as
initially feared. However, the reduction in government spending in the economy had a detrimental effect
on consumption, which are the drivers of economic growth in Rwanda.
Export growth increased again this fiscal year, aided by a favourable price for coltan. Growth in nontraditional exports also increased but they remain a small component of overall exports. Import growth
slowed in the second half of the year, which led to a smaller trade deficit than in previous fiscal years. The
slowdown in the import of capital goods may be a worrying sign about future business investment.
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