wandan exports have been growing faster than imports during the period from 2015 to 2018. This has not led to a short-term positive impact on gross official reserves supported by depreciation of the RWF. The growth in exports has led to short-term positive impact on Rwanda’s current account balance supported by steady growth in net current transfers. Rwanda is still dependent on raw commodity and agriculture-based exports which are also its top traded goods with its neighbours in the Common Market for Eastern and Southern Africa (COMESA) and the East African Community (EAC). However, Rwanda is highly integrated in COMESA and well-integrated EAC but its trade is unbalanced due to the persistent merchandise trade deficit in both regions and poor intraregional exports to the EAC. This suggests that there is significant room to increase Rwanda’s exports to both regions.
Figure 1: Merchandise Trade Balance in Rwanda (2015-2018)
Source: UNCTAD 2019, UNCTADStat Database.
Total merchandise imports to Rwanda have increased to USD 2.6 billion in 2018, from an annual average of USD 2.4 billion from 2015 to 2017[1]. Exports also increased to USD 1.1 billion in 2018, from an annual average of USD 819.6 million from 2015 to 2017[2]. The stronger growth in exports has improved Rwanda’s merchandise trade balance slightly to a deficit of -USD 1.5 billion in 2018 from a deficit averaging -USD 1.6 billion from 2015 to 2017[3]. The growth in exports has had a short-term positive impact on gross official reserves supported by depreciation of the RWF.
Figure 2: Gross Official Reserves in Rwanda (2016-2022)
Sources: IMF 2019, Rwanda 2019 Article IV Report; IMF 2018, Rwanda Eighth Review Under the Policy Support Instrument; IMF 2017, Rwanda 2017 Article IV Report. Note: (*) Figures from 2019 onwards are projections from the IMF, 2019.
Gross official foreign exchange reserves increased to USD 1.3 billion in 2018 from an annual average of USD 1.0 million from 2015 to 2017[4]. During this period, the RWF depreciated by -3.8% in 2018/19 to RWF 878.6 per USD (2017/18: -3.4%)[5]. Imports have grown in spite of the depreciation in the currency because the depreciation had slowed down after more significant depreciation in 2015/16 and 2016/17. The RWF depreciated by an annual average of -7.6% in 2015/16 and 2016/17 from RWF 653.4 per USD in 2014/15 to RWF 816.3 per USD in 2016/17[6]. Gross official reserves are projected to increase to USD 1.4 billion in 2019, which is equivalent to 4.7 months’ import cover[7]. In the forward-looking medium-term from 2020 to 2022, gross official reserves are projected to increase to an annual average of USD 1.6 billion (approx. 4.7 months’ import cover)[8]. The growth in exports has also had a short-term positive impact on Rwanda’s current account balance supported by steady growth in net current transfers.
Rwanda’s current account balance improved to a deficit of -USD 747.0 million in 2018, from a deficit averaging -USD 1.0 billion from 2015 to 2017[9]. Apart from the growth in merchandise imports, which deteriorated the current account balance, growth in net current transfers has supported improvement of the current account balance. Net current transfers improved to a surplus of USD 657.0 million in 2018 from a surplus averaging USD 552.2 million from 2015 to 2017[10]. The current account balance is projected to deteriorate to a deficit of -USD 975.0 million (approx. -9.6% of GDP) in 2019[11]. In the forward-looking medium-term from 2020 to 2022, the current account balance is projected to deteriorate further to annual average deficit of -USD 1.0 billion (approx. -8.5% of GDP)[12].
Figure 3: Current Account Balance in Rwanda (2016-2022)
Sources: IMF 2019, Rwanda 2019 Article IV Report; IMF 2018, Rwanda Eighth Review Under the Policy Support Instrument; IMF 2017, Rwanda 2017 Article IV Report. Note: (*) Figures from 2019 onwards are projections from the IMF, 2019.
However, Rwanda is still heavily dependent on raw commodity exports which have been affected by commodity price volatility and the general decline in commodity prices since 2014. For example, gold prices have been volatile having declined by an annual average of -9.3% in 2015 and 2016 to USD 1160.1 per ounce in 2015, before recovering to its medium-term average of USD 1258.2 per ounce from in 2016 to 2018[13]. The spot price of iron ore also declined by an annual average of -22.0% from USD 97.4 per MT in 2014 to USD 58.6 per MT in 2016, before recovering to USD 71.1 per MT in 2017[14]. Brent crude oil prices declined by an annual average of -24.0% from USD 98.9 per barrel in 2014 to USD 44.0 per barrel in 2016, before recovering to USD 54.4 per barrel in 2017[15]. In addition, agricultural products contribute a considerable proportion of export earnings which undermines stability of Rwanda’s external sector because export earnings are vulnerable to the adverse impact of climate change. The top raw commodities and agricultural exports such as gold, metallic ores, petroleum, tea and coffee constituted 77.4% of Rwanda’s total export earnings in 2018 which has increased from the average of 76.0% from 2015 to 2017 (2014: 68.0% of exports)[16]. In spite of this concentration of exports, Rwanda is well integrated in terms of regional trade with neighbouring countries in COMESA and the EAC but its trade is unbalanced.
The top-five exports from Rwanda to COMESA are petroleum, tea and mate, rice, wheat flour and leather which constituted 14.4% of total exports in 2018 (2015-‘17: 16.3% of total exports)[17]. The value of the top-five exports from Rwanda to COMESA increased to USD 159.7 million in 2018 from an annual average of USD 131.4 million from 2015 to 2017[18].
The value of total exports from Rwanda to COMESA decreased to USD 278.7 million (approx. 25.1% of total exports) in 2018 from an average of USD 225.8 million (approx. 27.6% of total exports)[19]. These are very high levels of intra-regional trade given that the COMESA average intra-regional exports level was 11.9% of total exports in 2018. The COMESA intra-regional exports, meaning total exports amongst COMESA countries, as a share of total exports to the world increased from an average of 10.5% from 2015 to 2017[20]. Given Rwanda’s balance of merchandise trade in the region, there is significant room to increase its exports to COMESA countries.
Figure 4: Nominal Exchange Rate in Rwanda (2015-2018)
Sources: NBR 2019, Exchange Rate; NBR 2018, Annual Report 2017/18.
Rwanda’s top-five imports from COMESA are cement, sugarcane products, soap, cooking oil and maize. Although these imports are diversified they constituted only 7.1% of total imports to Rwanda in 2018 (2015-‘17: 9.0% of total imports)[21]. The value of the top-five imports from COMESA to Rwanda decreased to USD 183.5 million in 2018 from an annual average of USD 216.4 million from 2015 to 2017[22].
The value of Rwanda’s total imports from COMESA increased to USD 278.7 million (approx. 25.1% of total imports) in 2018 from an annual average of USD 225.8 million (approx. 27.6% of total exports) from 2015 to 2017[23]. These are very high or above-average levels of intra-regional trade given that the COMESA average intra-regional imports level was 6.5% of total imports in 2018[24]. The COMESA intra-regional imports, meaning total imports amongst COMESA countries, as a share of total imports from the world increased only from an average of 5.5% from 2015 to 2017[25].
Table 1: COMESA Regional Trade for Rwanda (2015-2018)
Source: UNCTAD 2019, UNCTADStat Database.
Rwanda maintains a persistent merchandise trade deficit in COMESA which decreased to a deficit of -USD 347.1 million in 2018 (2015-’17: -USD 440.8 million). Hence, there is significant room to increase Rwanda’s exports to COMESA countries. This would make Rwanda’s intra-regional trade balance in COMESA more equitable.
The top exports from Rwanda to the EAC are tea and mate, petroleum, leather, metallic ores and coffee, which constituted 7.2% of total exports in 2018 (2015-‘17: 9.5% of total exports)[26]. The value of the top-five exports from Rwanda to EAC increased to USD 79.3 million in 2018 from an annual average of USD 78.0 million from 2015 to 2017[27].
The value of total exports from Rwanda to the EAC increased to USD 120.7 million (approx. 10.9% of total exports) in 2018 from an average of USD 116.8 million (approx. 14.2% of total exports)[28]. These are relatively poor or below-average levels of intra-regional trade given that the EAC average intra-regional exports level was 17.9% of total exports in 2018. The EAC intra-regional exports, meaning total exports amongst EAC countries, as a share of total exports to the world decreased from an average of 20.8% from 2015 to 2017[29]. Given these levels of trade and Rwanda’s balance of merchandise trade in the region, there is significant room to increase its exports to EAC countries.
Table 2: EAC Regional Trade for Rwanda (2015-2018)
Source: UNCTAD 2019, UNCTADStat Database.
Rwanda’s top-five imports from EAC are cement, soaps, cooking oil, maize and fabricated steel. Although these imports are diversified they constituted only 6.6% of total imports to Rwanda in 2018 (2015-‘17: 8.0% of total imports)[30]. The value of the top-five imports from EAC to Rwanda decreased to USD 169.7 million in 2018 from an annual average of USD 193.2 million from 2015 to 2017[31].
The value of Rwanda’s total imports from EAC decreased to USD 634.0 million (approx. 24.5% of total imports) in 2018 from an annual average of USD 650.9 million (approx. 27.0% of total exports) from 2015 to 2017[32]. These are relatively high or above-average levels of intra-regional trade given that the EAC average intra-regional imports level was 20.9% of total imports in 2018[33]. The EAC intra-regional imports, meaning total imports amongst EAC countries, as a share of total imports from the world increased only from an average of 20.7% from 2015 to 2017[34].
Rwanda maintains a persistent merchandise trade deficit in EAC which decreased to a deficit of -USD 513.3 million in 2018 (2015-’17: -USD 534.1 million). Rwanda is quite reliant on the EAC for its imports and there is significant room to increase its exports to EAC countries. This would make Rwanda’s intra-regional trade balance in EAC more equitable.
[1] UNCTAD 2019. UNCTADStat Database, United Nations Conference on Trade and Development: Geneva. Available At: https://unctadstat.unctad.org/ [Last Accessed: 26 September 2019].
[2] UNCTAD 2019. UNCTADStat Database, ibid.
[3] UNCTAD 2019. UNCTADStat Database, ibid.
[4] IMF 2019a. Rwanda 2019 Article IV Report, International Monetary Fund: Washington, D. C. Available At: https://www.imf.org/ [Last Accessed: 15 October 2019]; IMF 2018. Rwanda Eighth Review Under the Policy Support Instrument, International Monetary Fund: Washington, D. C. Available At: https://www.imf.org/ [Last Accessed: 15 October 2019]; IMF 2017. Rwanda 2017 Article IV Report, International Monetary Fund: Washington, D. C. Available At: https://www.imf.org/ [Last Accessed: 15 October 2019].
[5] NBR 2019. Exchange Rate, National Bank of Rwanda: Kigali. Available At: https://www.rbm.mw/ [Last Accessed: 15 October 2019]; NBR 2018. Annual Report 2017/18, National Bank of Rwanda: Kigali. Available At: https://www.rbm.mw/ [Last Accessed: 15 October 2019].
[6] NBR 2019. Exchange Rate, ibid.
[7] IMF 2019a. Rwanda 2019 Article IV Report, ibid.
[8] IMF 2019a. Rwanda 2019 Article IV Report, ibid.
[9] IMF 2019a. Rwanda 2019 Article IV Report, ibid.; IMF 2018. Rwanda Eighth Review Under the Policy Support Instrument, ibid.; IMF 2017. Rwanda 2017 Article IV Report, ibid.
[10] IMF 2019a. Rwanda 2019 Article IV Report, ibid.; IMF 2018. Rwanda Eighth Review Under the Policy Support Instrument, ibid.; IMF 2017. Rwanda 2017 Article IV Report, ibid.
[11] IMF 2019a. Rwanda 2019 Article IV Report, ibid.
[12] IMF 2019a. Rwanda 2019 Article IV Report, ibid.
[13] IMF 2019b. IMF Primary Commodity Prices, International Monetary Fund: Washington, D. C. Available At: https://www.imf.org/ [Last Accessed: 4 October 2019].
[14] IMF 2019b. IMF Primary Commodity Prices, ibid.
[15] IMF 2019b. IMF Primary Commodity Prices, ibid.
[16] UNCTAD 2019. UNCTADStat Database, ibid.
[17] UNCTAD 2019. UNCTADStat Database, ibid.
[18] UNCTAD 2019. UNCTADStat Database, ibid.
[19] UNCTAD 2019. UNCTADStat Database, ibid.
[20] UNCTAD 2019. UNCTADStat Database, ibid.
[21] UNCTAD 2019. UNCTADStat Database, ibid.
[22] UNCTAD 2019. UNCTADStat Database, ibid.
[23] UNCTAD 2019. UNCTADStat Database, ibid.
[24] UNCTAD 2019. UNCTADStat Database, ibid.
[25] UNCTAD 2019. UNCTADStat Database, ibid.
[26] UNCTAD 2019. UNCTADStat Database, ibid.
[27] UNCTAD 2019. UNCTADStat Database, ibid.
[28] UNCTAD 2019. UNCTADStat Database, ibid.
[29] UNCTAD 2019. UNCTADStat Database, ibid.
[30] UNCTAD 2019. UNCTADStat Database, ibid.
[31] UNCTAD 2019. UNCTADStat Database, ibid.
[32] UNCTAD 2019. UNCTADStat Database, ibid.
[33] UNCTAD 2019. UNCTADStat Database, ibid.
[34] UNCTAD 2019. UNCTADStat Database, ibid.
