Wednesday, March 18, 2009

Rwanda Cuts 2009 Economic Growth Forecast to 5-7%

By Sarah McGregor - March 11 (Bloomberg) 

Rwanda’s central bank cut its economic growth forecast for this year to between 5 percent and 7 percent after coffee prices fell and investment declined, Governor Francois Kanimba said.

“The main commodity export sector has been affected by the financial crisis,” Kanimba said in an interview in Dar es Salaam, Tanzania today, where he is attending an International Monetary Fund conference. “We’ve also seen a slowdown in private inflows.”

Rwanda, which earns most of its foreign exchange from tea and coffee, forecast in December the economy would expand between 8 percent and 10 percent this year, compared with about 11 percent growth in 2008. The central African country is rebuilding its economy after the 1994 genocide that killed 800,000 people.

The price of coffee, which accounts for about half of Rwanda’s foreign exchange, has dropped 27 percent in the past six months. The country’s 500,000 coffee farmers produce about 20,000 metric tons every year, according to the Kigali-based Rwanda Coffee Board.

Almost half of Rwanda’s six-month budget through June will be funded by international donors, Kanimba said. The country’s top donors, including the World Bank, African Development Bank, the European Union and the U.K., have pledged to maintain or increase aid flows over the next several years, the minister said.

Banking Crisis

Rwanda is also in talks with the IMF, World Bank and regional lenders for funds to help boost commercial banks’ capital so that they can increase loans to builders, food producers and manufacturers, Kanimba said.

With deposit inflows slowing, “our banks are in a very serious homegrown liquidity problem,” he said. “We are discussing with the World Bank and IMF to get liquidity to be able to continue to support loans to the private sector” and “to sustain the growth momentum.”

An IMF team that visited Rwanda last week agreed to allow the country to move to a new economic monitoring program, with fewer restrictions, by the first quarter of 2010, Kanimba said.

The IMF’s Policy Support Instrument is aimed at countries that don’t require IMF loans, though still want monitoring of their economic policies and advice from the fund.

Rwanda, with a population of 8.3 million, borders Democratic Republic of Congo, Uganda, Tanzania and Burundi.