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Rwanda Keen to Reduce Trade DeficitWednesday, September 17, 2014 > 09:30:58
The Government of Rwanda intends to shift to public private partnership as a way of attracting more investors in the key sectors. The initiative, it is expected, will help to increase exports and reduce on imports, a top government official has said.
Trade and Industry Minister Francois Kanimba told The Independent in an interview that they have identified sectors such as mining, horticulture and manufacturing as the backbone of the government strategy to increase the exports.
Recently, the Central Bank of Rwanda released statistics showing that the country's exports to the East African partners had increased by 38.6% - rising to $97.8million (Rwf 66.7billion) worth of goods in the first half of 2014, up from $70.7million (Rwf 48.2billion) a year earlier.
However, despite the positive export results, the biannual monetary policy and financial stability statement statistics showed that the trade deficit had widened by 3.7% as the imports rose from $239 million to $247.8 million in the same period last year.
He said that small investors were facing challenges of lack of enough capital caused by failure by financial institutions to provide loans, which Kanimba said was a challenge to the economic growth of the country.
"We are thinking about creating a possible way of working as public private partnership with private sectors. Our aim is to increase exports and reduce on the existing trade imbalance," Kanimba said.
"There is still lack of support in the mining sector and I think banks need to understand the situation and provide support to small miners," he added.
Kanimba further said that the country's value of exports has been increasing by 15-20% per annum in the last six years though more is needed to double the exports.
Despite the good government policies, there are still some financial constraints to put up the industrial parks.
Economic experts argue that Rwandans need to move away from the ancient mindset and instead focus on aggressive business-oriented ideas to save the country from the escalating trade deficit that hinders economic growth.
Prof. Manasseh Nshuti, a renowned economist in Rwanda, said for the country to narrow on the trade imbalance there is need for the people to change their thinking and utilize the integration benefits by investing in cross border trade.
"We still have a long way to go," he said. "Rwandans need to wake up and compete with other regional counterparts so we should do away with old mentality of thinking that business will be done by foreigners." He said there was a need to inculcate a culture of entrepreneurship because most university students in Rwanda are targeting a government job or getting a formal job unlike other countries where a student finishes school with plans to start up his or her own business.
A trade deficit has a negative impact since it represents an outflow of domestic currency to foreign markets, he added.
He said a government policy of setting up small industries, investing much in horticulture, and focusing on tourism sector could help in bridging the trade deficit gap.
"Banks have to be flexible and inject money in upcoming entrepreneurs as well as small cooperatives to sustain the economic growth and produce more products for exports," he said.
Rwanda, a landlocked country, is ranked as the most competitive economy in the region though it depends on the ports of Mombasa in Kenya and Dar es Salaam in Tanzania on the Indian Ocean. However, the challenge that remains is that the cargo trucks that carry imports to Kigali sometimes go back empty, which makes the country dependent on imports.
Rwanda mostly exports tea and coffee, raw hides and skins, vegetables and flowers, while it imports clothing, fertilizers, sugar, palm oil and cement among other goods.
According to statistics from Rwanda Long Distance Drivers Union, over 230 trucks carrying imports enter Rwanda through the various border points per day with majority coming from Ugandan and Tanzania.
Issa Mugarura the Union's vice president observed that about 20 to 30 trucks go out carrying Rwandan's exports mostly to Mombasa port through the Northern Corridor per day.
"It's still a challenge as most cargo trucks go back empty from Rwanda. I think it's because of low level of production," he said.
Some of the persisting challenges that hinder the exports include lack of packaging materials as they exports can't compete on international market with poorly- packaged products.
Exporters believe that government must intervene in addressing the packaging issue to allow traders to contend favorably. He said while it's good that the government is focusing on increasing the exports, it has to address the issue of packaging that is hindering our economy.
On several occasions, Rwandan goods were expelled from European markets because of poor packaging, I think a lot needs to be done to attract more investors to tap into packaging industries, an exporter, who preferred anonymity, said.