Rise in imports, weak franc, to trigger high cost of living
Friday February 24 2023
Rwanda’s trade deficit widened by nearly 20 percent last year as the country looks to various way of backing up the growing economy.
According to data from the Ministry of Finance and Economic Planning, trade deficit widened to over $2.3 billion from January to November 2022, from over $1.9 billion in the same period in 2021.
In 2022, Rwanda’s imports reached $4 billion from $3.1 billion in 2021 while total exports recorded in 2022 were over $1.7 billion from $1.2 billion in 2021.
With increasing imports, there is a possibility of food prices and the cost of living increasing further this year. Food prices increased by 20 percent in January.
The widening trade deficit was attributed by the Minister of Finance, Uzziel Ndagijimana, to the increased cost of fertilizers for agriculture, fuel prices on the international market, and manufacturing equipment.
"To be able to export, you need to invest in production. And part of the investment in production requires additional imports. Let’s say for promoting industry, we are constructing industrial parks; we need to import machinery, spare parts, all the inputs, and semi-finished products to produce. So, the import will increase for that component," the minister explained during his presentation to the parliament.
Among the increasing imports are foodstuffs, following a decrease in agricultural production and a 14 percent shrink in local food processing last year.
Farmers say the price of commonly used prices, NPK and Urea, have doubled in price since 2021, affecting their yields, in addition to harsh weather events.
As a result, traders have turned to neighboring countries and other alternative markets to import food enough to supply the local market.
Joseph Akamuntu, Director of the Commercial Chamber at the Private Sector Federation and importer told Rwanda Today that for the past quarter, they have been importing mainly beans and maize, both staple foods, from Uganda in bulk after Rwanda’s production of such foods fell short.
“Food items most in demand from outside Rwanda now are beans, maize, sugar, and oil. We recently returned to Uganda to import most of this because they are cheaper there. We have also started importing Maize from Zambia and cooking oil from Egypt, both of which are new import markets,” Akamuntu explained.
The price of a kilo of beans in Rwanda’s local market has more than doubled to over $2 since last year in January.
Increasing imports have also led to a weakening franc as the country imports
By Tuesday, February 14, the Rwandan franc was trading between Rwf1,078 and Rwf1098 against the dollar from Rwf1,028 and Rwf1,033 during the same period last year.
Forex traders say a sharp increase in foreign currency demand has been widely felt on the market despite the limited supply of the currency.
According to the central bank’s report, year-on-year, the franc depreciated by 5.3 percent against the US dollar, higher than the 4.3 percent recorded in June 2021.