Global Insight Daily Analysis
Presenting the 2005 monetary policy statement, the governor of the Banque Nationale du Rwanda (the central bank), Francois Kanimba, stated that inflation had accelerated from 10.2% in 2004 to 11.1%. In addition to rising prices, Kanimba also drew attention to the fact that the trade balance has deteriorated, with the deficit widening from US$74 million in the first half of 2004 to US$144 million for the same period in 2005. Whilst exports increased by 13.9% during this period, imports expanded by 59%, mainly driven by higher demand for capital goods and supplies for the manufacturing industry.
Significance: Underlying inflation had stabilised at 2.9%,
indicating that much of the price increases were driven by food shortages and
high oil prices, the latter of which are also likely to have widened the trade
deficit. Rwanda's export performance continues to be a stumbling block,
particularly because the country has based much of its ambitious development
strategy on external financing (see Rwanda: 16 December 2005: IMF's Article IV
Report on Rwanda Warns of Entrenched Fiscal and Current-Account Deficits).