World Bank helps bridge widening trade deficit
The gap between Rwanda’s import bill and export receipts is widening. Figures from the 2012/13 budget that the Minister of Finance John Rwangombwa presented to Parliament last week show that the country will import goods worth $1,778.4 million but earn $466 million from imports.
Even though Rwangombwa attributes the huge gap to the country’s big projects that require imported materials and high oil prices, he nonetheless admits that the trade deficit is a cause for concern.
“The underlying pressures are already beginning to be felt as the value of exports show only a modest increase on account of the projected lower commodity prices. On the other hand outlays for oil imports have been increased to respond to the high price levels,” he said.
To mitigate the effects of this on the economy, the government plans to diversify.
“The big difference between imports and exports is a great challenge for us, but we are emphasizing efforts to diversify commodities for exports,” he said. Two weeks ago, these efforts received a big boost when the World Bank committed to bankroll a three-year project to accelerate export growth through diversification and private investments.
“The Governance for Competitiveness Technical Assistance Project (G4C) is… strengthening the institutional capacity of selected institutions and to improve competitiveness in selected sectors—particular horticulture and tourism,” said the minister of trade, Francoise Kanimba.
According to Kanimba, tourism and horticulture are a priority because they have great potential for improvement and capacity to turn around the country’s export prospects.
Selected institutions with a role in improving tourism and horticulture will also be supported. They include MINICOM, MIFOTRA, PSCBS, RDB, MINAGRI/NAEB and PSF.
“What the project will do is help in responding to a number of structural and capacity building challenges that are affecting competitiveness in Rwanda. These challenges relate not only to the public sector, but also to the private sector,” said Mimi Ladipo, the World Bank country manager.
The project will for instance help the selected beneficiaries address the high staff turnover, human resource inexperience, skills deficit, inequity in pay, lack of career development and underdeveloped human resources management systems.
Each of the institutions will be required to assess their areas of weakness, come up with a solution and through financial and logistical support provided by the program, ensure such gaps are mended.
For example, RDB’s tourism unit head, Rica Rwigamba notes that while Rwanda seeks to target high end tourism, mountain gorillas remain by far the only attraction known to tourists.
“We could blame this on inadequate information packaging. So we will seek to repackage our tourism menu with the aim of not only consolidating the existing market but also interest our country to new markets,” Rwigamba said.
East Africa is in the process of establishing a single tourist VISA which will see tourists to the region only use a single VISA to tour the entire community.
“We need a situation where tourists will look at the community, consider their options and choose Rwanda as their destination but we have to compete for that attention with other members hence the importance of this competitiveness project,” Kanimba added.
At a time when USA, Rwanda’s most major source of visitors, is suffering with bad economic times, it means few will be spending their savings on annual holidays in Africa.
“That means, another focus will be figuring out how to penetrate new markets. China, Japan and Russia are some of those on our radar,” added Rwigamba.
Rwanda’s current tourism plan was drawn in 2002, and according to Rwigamba, it’s time to realign it and accommodate new opportunities and address old challenges.
Dr. Alex Kanyankore, the director general of National Agriculture and Export Board (NAEB) said that the problem is not lack of market for horticulture products but rather quality standards that meet the needs of the international market.
Kanyankore revealed that, though the World Bank project will seek to help NAEB increase vegetable and fruit volumes for export, urgent efforts will focus on how to improve the quality of the country’s 35,000 metric tons produced per year.
“Issues of transportation, certification and guaranteeing quality standards are more important needs to increase the competitiveness of our products on the international market,” Kanyankore added.
A recent surge in Airlines with routes connecting Kigali to other countries should be able to address the transportation gap as these airlines have cargo space.
“But even then, we need to establish a strong link with these airlines to be sure of the available cargo space for horticulture products available for export,” Kanyankore said.
Value addition for Rwandan products has also been another long running need. For instance, Kanimba points out that, if pineapple farmers in Rwanda’s country side could process their raw fruits into high quality and packed pineapple juice, they could earn more from their efforts.
“That’s why the private sector federation has been made a beneficiary to ensure capacity enhancement of private sector members to actually exploit existing opportunities,” Kanimba said.