Rwanda's expansion will slow to 6% - central bank
October 12, 2006
By Arthur Asiimwe
Kigali - Rwanda's economy would grow by 6 percent this year, easing from 6.5 percent year on year because of drought conditions hampering the agricultural sector, central bank governor Francois Kanimba said yesterday.
"Agriculture performance has almost declined by 3 percent due to poor rains, but the manufacturing and service sectors will grow by over 10 percent this year."
Rwanda registered 6.5 percent growth in gross domestic product (GDP) last year, riding mainly on improved coffee prices on the international market and better rains.
For the past five years Rwanda's economy has grown at an average rate of 7 percent.
But a two-year energy crisis has started to take its toll and drought in parts of Rwanda's eastern and southern provinces have hit the agricultural sector, which contributes up to 45 percent of GDP.
Exports grew by 9 percent in the first eight months of the year compared with the same period in 2005 as increased coffee and tea volumes fetched higher prices.
Rwanda's coffee industry is expected to earn $50 million (R385 million) this year and tea $38 million. Other growth areas in the economy include beer production, construction, tourism and telecommunications.
But food shortages and persistent energy crises drove inflation up to 9.2 percent this year from 7 percent last year, Kanimba said. "Prices of food items have been hiking on a daily basis."
Rwanda's banks, laden with non-performing loans stemming from the country's 1994 genocide, were steadily recovering because of a new wave of banking sector reforms, he said.
Non-performing loans had fallen to 22 percent this year from 40 percent in 2003, thanks to information sharing about bad borrowers among commercial banks.
By the end of the year, minimum share capital for existing and new commercial banks will be raised to $7.2 million from $2.7 million to boost competitiveness.
"Those that fail to adhere to this new regulation will be obliged to merge or close," Kanimba said.
The central bank would introduce a capital market next year for long-term bonds capable of financing bigger companies and the government. - Reuters
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