63257 Rwanda Economic Update Spring Edition April 2011 SEEDS FOR HIGHER GROWTH The World Bank PREFACE The Rwanda Economic Update reports and synthesizes key economic developments in the past six months in Rwanda’s economy. It places them in a medium-term and regional context, and will increasingly assess the implications of these developments and policies for the outlook of Rwanda’s economy. The Update will cover in each edition a special feature on a selected topic. It is intended for a wide audience, including policy makers, business leaders and other market participants, and the community of analysts engaged in Rwanda’s economy. The Rwanda Economic Update was prepared and compiled by the Poverty Reduction and Economic Management team at the World Bank Country Office in Rwanda, under the leadership of Birgit Hansl, Senior Economist: Peace Aimee Niyibizi (economic update section), Loraine Ronchi and Valens Mwumvaneza (agriculture section). The report also benefited from guidance and advice provided from Wolfgang Fengler, Lead Economist, Kathie L. Krumm, Sector Manager and Omowunmi Ladipo, Country Manager. In addition, the report benefited from peer reviewer inputs by Stephen Mink, Lead Economist and Anton Dobronogov, Senior Economist. For more World Bank information on Rwanda: For more information about the World Bank and its activities in Rwanda, please visit: www.worldbank.org/rw If you would like to be included into the email distribution list for this semi-annual series and related publications, please contact singabire@worldbank.org. For questions and comments relating to this publication, please contact bhansl@worldbank.org. ACRONYMS BNR Banque Nationale du Rwanda (Central Bank of Rwanda) CAADP Comprehensive Africa Agriculture Development Programme CIP Crop Intensification Program COMESA Common Market for Eastern and Southern Africa CPI Consumer Price Index DRC Democratic Republic of Congo EAC East African Community EDPRS Economic Development and Poverty Reduction Strategy FWC Fully Washed Coffee GDP Gross Domestic Product ha hectare kcal kilocalorie kg kilogram LWH Land Husbandry, Water Harvesting and Hillside Irrigation NAP National Agricultural Policy NISR National Institute of Statistics of Rwanda PSTA Strategic Plan for Transformation of Agriculture Rwf Rwandan Franc RDA Recommended Dietary Allowance SSA Sub-Saharan Africa USAID United States Agency for International Development WDI World Development Indicator iii | P a g e TABLE OF CONTENT Preface ............................................................................................................................... ii Acronyms ...........................................................................................................................iii Table of content ................................................................................................................. iv List of figures ...................................................................................................................... v List of Boxes ....................................................................................................................... v List of tables ....................................................................................................................... v Executive Summary ............................................................................................................ vi Part 1: Seeds for Higher Growth.......................................................................................... 1 1.1 Agriculure’s Strategic role .............................................................................................................. 1 1.2 Agriculture Growth And Productivity ............................................................................................. 3 1.3 Food Crops and Food Security ........................................................................................................ 4 1.3.1 Food Crops .............................................................................................................................. 4 1.3.2 Food Security .......................................................................................................................... 5 1.4 Export Crops ................................................................................................................................... 7 1.4.1 Horticulture ............................................................................................................................ 7 1.4.2 Tea .......................................................................................................................................... 8 1.4.3 Coffee ..................................................................................................................................... 9 1.5 Seeds for Growth ........................................................................................................................... 10 1.5.1 Soil Fertility and Erosion Issues ............................................................................................. 10 1.5.2 Irrigation Needs ..................................................................................................................... 11 1.5.3 Post Harvest Management .................................................................................................... 12 1.5.4 Access to Financial Services ................................................................................................... 12 Part 2: Recent Economic DevelopmentS ............................................................................. 13 2.1. Real Sector Trends ........................................................................................................................ 13 2.2. Price Trends .................................................................................................................................. 15 2.3. Fiscal trends .................................................................................................................................. 16 2.4. External Sector Trends.................................................................................................................. 19 2.5. Exchange Rate Trends .................................................................................................................. 21 2.6. Monetary Policy and Credit Trends .............................................................................................. 22 Data Sources and References ............................................................................................. 24 Annex 1: Growth Trends in Foods Crops (2004-2010) ........................................................ 25 Annex 2. Gross Domestic Product by Activity at constant 2006 prices (Rwf billion) ............. 27 Annex 3. Government Priority Areas of Spending ............................................................... 28 iv | P a g e LIST OF FIGURES Figure 1. GDP Growth by Sector (Percent) .............................................................................................. vi Figure 2. Rwanda’s Real Growth Compared to EAC and SSA (Percent) ................................................... vii Figure 3. GDP Composition (Percent) ....................................................................................................... 3 Figure 4. Agricultural Productivity Trends in Rwanda .............................................................................. 4 Figure 5. Growth and Productivity Comparison ....................................................................................... 4 Figure 6. Food Availability Indicators in Rwanda ...................................................................................... 6 Figure 7. Tea Export Values and Prices ..................................................................................................... 8 Figure 8. Coffee Export Values and Prices ................................................................................................ 9 Figure 9. Growth in the Agriculture Sector (Percent) .............................................................................. 14 Figure 10. Growth in the Services Sector (Percent) ................................................................................. 15 Figure 11. Growth in the Industry Sector (Percent) ................................................................................. 15 Figure 12. Inflation Trends 2007-2010 ..................................................................................................... 16 Figure 13. Domestic Fuel Price Trends in 2010 (Rwf) .............................................................................. 16 Figure 14. Average Price of Rwanda Coffee, 2010 (US$) ......................................................................... 19 Figure 15. External Developments (Percent of GPD) ............................................................................... 21 Figure 16. Nominal Exchange Rate of Major Currencies, end March=100 .............................................. 22 Figure 17. Lending and Deposit Rates (Percent) ...................................................................................... 22 Figure 18. Money Market Operations (Billion of Rwf) ............................................................................. 23 LIST OF BOXES Box 1: CIP and Growth in Food Crops ....................................................................................................... 5 Box 2: Coffee Production Cycle ................................................................................................................ 10 LIST OF TABLES Table 1. Employment Trends (Percent) .................................................................................................... 2 Table 2. Imports of Food Products (Percent) ............................................................................................ 7 Table 3. Insurance Activities in Rwanda (Billion of Rwf) .......................................................................... 14 Table 4. Government Budget 2009/10 and 2010/11 (Billion of Rwf) ...................................................... 17 Table 5. Main Export Products (US$ Million) ........................................................................................... 19 Table 6. Informal Cross Border Trade (Million US$) ................................................................................ 20 Table 7. Evolution of Imports by Economic Classification, Value in Million of US$ and Volume in Tons 20 Table 8. National Park Activities .............................................................................................................. 21 Table 9. Variations of EAC Currencies/Rwandan Franc (+Appreciation/-Depreciation) in 2010............. 22 Table 10: Compound Growth in Food crops (Percent) ............................................................................ 25 v|P a g e EXECUTIVE SUMMARY The current edition of the Rwanda Economic last five years (Figure 1), contributing about Update is titled Seeds for Higher Growth and 36.0 percent to the overall Gross Domestic specially features the agriculture sector. The Product (GDP). The sector occupies 79.5 importance of agriculture’s contribution to percent of the labor force and generates growth in Rwanda remains considerable, more than 45.0 percent of the country’s despite the emergence of other significant export revenues. The services sector growth drivers, such as services. Rwanda’s established itself as a second growth engine, agriculture sector will play an essential role registering double digit growth between in attaining the country’s development 2004 and 2008-albeit from a very low base-- vision of sustainable growth and increased before being affected by the global poverty reduction, due to its employment slowdown. In recent years, services weight. The agriculture feature of this marginally surpassed agriculture as the main Update edition outlines key channels contributor to GDP. through which agriculture contributes to the Figure 1. GDP Growth by Sector (Percent) economy. The second part of the Update 100% Agriculture Industry Services GDP (Right scale) 12.0% 13.4% 12.3% 14.7% 5.8% 9.6% provides the regular overview of recent macroeconomic developments. While the 80% special feature on agriculture will analyze 60% 8.0% 1.4% the evolving role of the sector over the past 15.1% 8.4% five years, the second part on recent 40% 11.3% 9.1% 4.0% economic developments will focus on events 20% during 2010. 3.0% 2.7% 6.4% 7.7% 4.9% 0% 0.0% The vision of Rwanda is to transform itself 2006 2007 2008 2009 2010 from a subsistence agricultural to a Source: National Institute of Statistics of Rwanda (NISR) knowledge-based economy by 2020. The Agriculture expenditure forms one of the achievement of this vision will require an priority expenditures of the Government of intensification and market-orientation of Rwanda’s annual budget with focus on agriculture on the one hand and a increasing productivity in the sector. Over diversification of the economy through a the past three years, allocations to the proliferation of non-agricultural sectors on agricultural sector have increased from 4.2 the other hand. This brief assesses progress percent of the budget in 2008 to 6.6 percent by Rwanda on both fronts. in the 2010/11 budget. Together with agricultural related spending allocated to Agriculture is one of two key growth other institutions, Rwanda now complies engines for Rwanda. The agricultural sector with the 10 percent commitment made grew at an average of 4.9 percent over the vi | P a g e under the Africa Union’s Comprehensive food security, but most of all will sow the African Agriculture Development Program seeds for higher overall economic activity. (CAADP) compact, of which Rwanda was the Overall, Rwanda’s economy is growing at a first signatory. The main recipient of the healthy rate, 7.5 percent in 2010, two agriculture budget shares were the percent higher than the East African Government’s flagship programs, such as the Community (EAC) and even more than Sub Crop Intensification Program (CIP) and the Saharan Africa (SSA) (Figure 2). During 2010 Land Husbandry, Water Harvesting and the services and industrial sectors Hillside Irrigation (LWH) Project, the latter progressed in their growth recovery, while being also supported with donor funds. growth in the agricultural sector slowed The strategic focus on agriculture, through down marginally. continued public investments, has Figure 2. Rwanda’s Real Growth Compared to EAC and SSA contributed to marked productivity (Percent) 12.0 increases and solid agriculture growth rates over recent years. However, in order to sustain these productivity increases in the 8.0 future, and in order to fully realize the growth potential for the agriculture sector, a 4.0 number of challenges would need to be addressed. These challenges include the 0.0 need to stronger focus on: (i) Reducing dependency on rain-fed agriculture through Source: World Development Indicator (WDI) and greater use of different models of irrigation; International Monetary Fund (ii) Better erosion control and integrated soil The country’s macroeconomic framework fertility management; (iii) Diversifying was remarkably stable, given the difficult agriculture production, in particular external post-crisis environment and agricultural export goods, for example in Rwanda’s position as a highly import- areas of horticulture and flowers, (iv) dependent land-locked country. This was Changing the skills profile of people mainly achieved through a prudent fiscal employed in agriculture, to foster the stance with strong focus on priority creation of increased agricultural off-farm expenditures, assisted by continued high employment such as agro-processing and grant financing from donors. Government other value chain activities, and (v) followed a large public investment program Developing a market-based food crop on a number of key strategic projects, all in distribution system to contribute to country- the infrastructure sector. But to date this is wide food security. Continued agriculture largely financed with domestic revenues and growth through the channels outlined above debt remains at manageable levels. Inflation will benefit agriculture growth and increase vii | P a g e declined. The external sector benefited from a switch to the July-June fiscal year from the recovery in international prices for calendar year.1 On July 1, 2010 the EAC Rwanda’s key export goods, tea and coffee. Common Market became effective, and Tourism receipts recovered fully in 2010 and Rwanda implemented the EAC Common reported record levels of non African tourist External Tariff Framework. This reduced arrivals. As a result the trade deficit revenues from trade taxes, but narrowed and reserves remained at reimbursement for these losses was comfortable levels. received from the Common Market of Eastern and Southern Africa (COMESA). Rwanda made great progress in deepening reforms, especially those designed to The outlook for a full recovery of Rwanda’s improve the business environment to economy during 2011 is cautiously support a private sector led development optimistic. Rwanda’s projected growth rate model. The Doing Business 2011 report for 2011 is 7.0 percent, significantly higher included Rwanda in the list of the ten most- than the 5.5 percent predicted for SSA or the improved economies. Despite Rwanda’s 5.9 percent predicted for the EAC. It is success in having established a sound expected that all sectors are likely to grow at investment climate foreign direct comparable pre-crisis levels again, but there investments remain at low levels. The is reason for a cautious positive outlook. The private sector is still nascent and would first 2011 harvest season was disappointing, profit much from access to technological and agriculture growth might turn out to be know-how and established distribution moderate. Services growth might be less channels abroad. Rwanda’s urbanization is rapidly, as previously driving Government slowing down, despite high population spending for health, education and other density. The major binding constraints to services is returning to pre-crisis levels. accelerated growth, investments and Manufacturing remains in the mist of exports are the lack of economic recovery. Lead indicators for growth, like infrastructure and the limited skills base. credit to the private sector, performed in 2010 less well than expected, as was growth Rwanda is attributing high importance to in the construction sub-sector. Interest rates increased regional integration and is already remain high. The outlook also remains benefitting from the positive growth dependant on effects of yet again increasing momentum in East Africa. In comparison to international fuel and food prices. The its East African peers, Rwanda fairs well and balance of payment continues to be confidently leads in growth terms. But large vulnerable to export shocks, due to the growth potentials remain to be exploited, dependence on a few export products. such as benefitting from regional power trade. Rwanda completed its alignment with the budget calendar of the EAC, resulting in 1 Following a six-month mini budget in 2009, fiscal year 2009/10 was the first full fiscal year under the new budget calendar. viii | P a g e PART 1: SEEDS FOR HIGHER GROWTH This feature outlines key channels through which agriculture contributes to the current economy. Agriculture is at the heart of Rwanda’s economy. The sector occupies 79.5 percent of the labor force, contributes one-third of GDP and generates more than 45.0 percent of the country’s export revenues. Agriculture is also important for national food self-sufficiency, accounting for well over 90.0 percent of all food consumed in the country. This part also identifies challenges and a number of policies that address those challenges. The latter represent important seeds for future agriculture and overall growth. In order to adequately reflect trends this part will present, wherever possible, data for the past five years, 2006-2011. Source: World Bank Archives Rwanda 1.1 AGRICULURE’S STRATEGIC ROLE the fact that agriculture is the primary source of employment in Rwanda. In 2006, The agriculture sector2 will play a key role more than two-thirds of the entire working in realizing Rwanda’s vision of transforming population, and 86.5 percent of rural the country’s economy by 2020. Given its population, was employed in the agriculture predominant role in the economy, sector (Table 1). The achievement of agriculture is considered as a main catalyst Rwanda’s growth and poverty reduction for sustainable growth and poverty targets will require to a large extend a rapid reduction. This is fundamentally linked to intensification and increased market- orientation of the agriculture sector. 2 When reference to agriculture is made in this document, it includes production and its upstream (e.g. input provision) and downstream (e.g. agro processing, trading, and exporting) linkages. 1|P a g e Table 1. Employment Trends (Percent) earnings, there is a need of diversifying 2000 2006 commercial agriculture away from its Employment by sector % of working population Agriculture 89.5 79.5 current heavy reliance on coffee and tea. For Manufacturing 1.7 3.3 this, increased efforts are needed to actively Services 8.7 17.2 invest in non-traditional export crops, for Characteristics of agricultural employment % of working population Waged farmers 3.7 8.2 example, horticultural crops such as fruits, Non-waged farmers 84.9 71.3 vegetables, and cut flowers; essential oils Subsistence farmers 35.8 31.6 Unpaid farm workers 49.1 39.7 such as petunia and geranium; macadamia Source: NISR nuts; vanilla; and silk, and the production infrastructure required for this. Increasing agricultural productivity will enable the sector to move from subsistence In recent years a framework was set up for to a commercial mode of production, while the modernization of agriculture in ensuring food security and progressively Rwanda. In 2004, a National Agricultural contributing to the creation of linkages to Policy (NAP) was formulated and a Strategic other sectors. Plan for Agricultural Transformation (PSTA) was developed and updated in 2009. The In the short to medium term, off-farm updated PSTA II became the basis of the first employment within the sector will need to CAADP-approved Agricultural Sector become an alternative source of rural Investment Plan in Africa. In the income. This includes areas such as agro- implementation of these frameworks, processing packaging, storage, transport, programs were put in place, such as the crops and input trade. Between 2001 and Crop Intensification Program, the One Cow 2006But the share of waged workers per Poor Family (GIRINKA program) and increased –doubling to 8.2 percent of all later, the LWH Program. To date, results are agricultural jobs.3 This might be an early noticeable in terms of sustained agricultural indicator for a trend away from subsistence growth and increased productivity, as well as farming to other off-farm agricultural improved land management. employment. But major obstacles remain, largely related to the low levels of skills Ensuring food security of the population is a which limit productive opportunities outside key aim of the Government’s Economic and of agriculture. Development and Poverty Reduction Strategy (EDPRS), alongside with raising Export crops are key contributors to agricultural productivity. In this context, agriculture growth, but need to diversify in basic food crop production is projected to the future. With the goal of stimulating rise by 15 percent over the EDPRS period growth and increasing foreign exchange and the average energy intake is projected to increase from 1,734 kilocalories (kcals) to 3 Non waged farmers are subsistence and unpaid farmers. 2,100 kcals per person/day. It is expected 2|P a g e that an increased and diversified household a record of 7.7 percent, surpassing all other income will significantly reduce rural poverty sectors. This reflects the continued and enhance the level of food security in importance and dynamism of the sector. For Rwanda. 2010, agriculture growth stood at 4.6 percent. 1.2 AGRICULTURE GROWTH AND PRODUCTIVITY Agricultural productivity increased steadily in the past decade (Figure 4). Land Agriculture constitutes the second biggest productivity (agricultural valued component of GDP with 36.0 percent. But added/cultivated land in ha, henceforth ha) only as recent as 2005 agriculture was the increased dramatically in Rwanda. Indeed, main GDP contributor. The retreating the country is leading compared to other agriculture share was absorbed by the African countries with similar GDP shares of services sector, while the industry sector agriculture (Figure 5).4 The relatively high stagnated at around 13.9 percent of GDP level of land productivity reflects the (Figure 3). However, agriculture remains the favorable agro-climatic potential resulting in main employer, especially of the poorer and two harvest seasons, as well as the intensive less educated segments of the population. nature of the predominant agricultural Figure 3. GDP Composition (Percent) production systems.5 In contrast, labor Agriculture Industry Services Adjustments 38.0 productivity remains low compared to these 2001- 43.0 12.7 6.2 2005 countries, albeit it increased over the last 45.8 2010 34.6 13.9 5.7 decade. This is related to the fact that 44.9 Rwanda has the highest proportion of rural 2009 35.5 13.8 5.9 45.0 population, most of them engaged in labor 2008 34.9 14.4 5.7 intensive agriculture.6 It appears that most 43.8 2007 36.6 13.9 5.7 opportunities for future productivity gains 42.0 lay in the area of making agricultural 2006 38.4 13.8 5.8 production less labor intensive, or in other 0% 20% 40% 60% 80% 100% words less subsistence based. Source: NISR Real agriculture growth averaged 4.9 percent between 2006 and 2010. During this period the sector started to benefit from 4 For selected countries, Ivory Coast, Ghana, Kenya, Mali, large investments in fertilizers, improved Mozambique, Rwanda, Uganda, Tanzania and Zambia, agricultural GDP share was varying between 20 percent and seeds and extension services through the 40 percent in 2007 (World Development Indicator - WDI CIP. Being by nature highly dependent on database). 5 weather conditions, favorable climate during World Bank. (2007). Promoting Pro Poor Agricultural Growth in Rwanda: Challenges and Opportunities. 2008 and 2009 also contributed to strong 6 World Bank. (2008). World Development Report: growth. In 2009, agriculture growth reached Agriculture for Development. Washington DC. 3|P a g e Figure 4. Agricultural Productivity Trends in Rwanda Figure 5. Growth and Productivity Comparison 1,600.0 Rwanda, Current US$ 800.0 In comparison to other African countries Rwanda’s Agric. VA (million) 700.0 agricultural growth is high… Agric., VA/worker -Right Scale 1,200.0 600.0 12.0 Agric., VA/ha-Right Scale Average Growth in Percent 500.0 800.0 400.0 2000-2005 8.0 300.0 2006-2009 400.0 200.0 100.0 4.0 0.0 0.0 Source: WDI Database 1.3 FOOD CROPS AND FOOD SECURITY 0.0 1.3.1 FOOD CROPS … as is land productivity… Food crops constitute 84.0 percent of 800.0 Land productivity (US$/ha) agriculture GDP, or 30.3 percent of overall 2000 GDP. Over the past five years, they 600.0 2004 2008 registered an average growth of 5.2 percent. Food crops also dominate the cultivable land 400.0 with almost 67.1 percent (NISR 2010), reflecting the subsistence nature of 200.0 Rwandan agriculture. 7 Since the formulation of the NAP, the cultivated area increased by 0.0 only 2.0 percent from 2004 to 2010, while food crop output registered an average … but labor productivity remains low. 900.0 growth of 7.0 percent per year (see Annex Labor productivity 1).8 This reflects good productivity growth Constant 2000 US$/Active worker 2000 through intensification (rather than 2004 600.0 environmentally unsustainable 2008 extensification), which is desirable to continue. 300.0 7 Roots and tubers constitute the largest share of food crops’ harvest (51.2 percent) followed by bananas (27.1 0.0 percent), fruits and vegetables (10.1 percent), cereals (7.3 percent), and pulses including beans and peas (4.3 percent). Source: WDI Database 8 Even more dramatically, since 2007 output reported a 12.7 percent increase, on average, while the cultivated area increased by 2.7 percent. 4|P a g e Strong growth in food crop production can 1.3.2 FOOD SECURITY be partly attributed to the CIP (Box 1). Increased food crop production led to Complementary investments in marshland improved food availability. Rwanda’s food irrigation, integrated soil fertility balance sheet has been improving as the management, farmer field schools have also country became self sufficient in 2009 played a role, as well as favorable weather (Figure 6a). There is also a continued conditions. The followings are some of key increase in terms of dietary allowances as accomplishments under the CIP: (i) the recommended by the Food and Agriculture increased use of improved seeds for maize Organization. Overall, Rwanda experienced (by 61.8 percent), wheat (by 46.3 percent) an upward trend in availability of energy and Irish potato (by 16.3 percent); (ii) the (kcals/capita/day) since 2008, but with national average in use of fertilizer doubled disparities across provinces and over from 8.5kilogram (kg) per ha in 2006 to seasons. Considering the stark regional around 16.0kg per ha in 2010,9 and (iii) the differences in food availability and food area under land use consolidation increased security (Figure 6b), connected to nine folds from 28,000 ha in the first season seasonality, it appears that a better market- of 2008 to 254,448 ha in the first season of based food crop distribution system could 2010. contribute significantly to country-wide food Box 1: CIP and Growth in Food Crops 10,500.0 CAGR security. Also, while substantial progress had Annual yield (,000 Tons) Vegetables & been made, World Health Organization fruits: 6.7% Pulses: recommendations for proteins and lipid 7,000.0 10.2% availability are not yet being met (Figure 6c Banana: 1.8% and 6d). For example, the recommendation 3,500.0 Roots & tubers: 9.4% for protein was met in 2009, but this could Cereals: not be sustained in 2010, when the country 15.3% 0.0 faced a slightly lower harvest. Source: Ministry of Agriculture Better food availability was accompanied In 2007, Government embarked on the CIP with the main objective to develop sustainable crop productivity through the with improved food and nutrition intake increased use of modern inputs, particularly seeds and fertilizer, across the country, despite regional agricultural technologies and the consolidation of land. The use of improved inputs by farmers could only be translated into profit by disparities. The results of the 2009 mitigating land fragmentation, addressed through the land use consolidation component. With substantial production gains Comprehensive Food Security and recorded for maize, rice, Irish potato and wheat, other food crops: beans, banana, soya, peas and cassava, were added in the first Vulnerability Analysis and Nutrition Survey season of 2010. may reflect a trend towards better food security. It found that 4.2 percent of 9 households had a low food consumption These figures were computed based on figures from the Common Performance Assessment Framework (mineral score (compared to 6.7 percent in 2006), fertilized used in tons) and the cultivated area (Ministry of Agriculture, crop production files). 17.4 percent had a borderline score (27.9 5|P a g e percent in 2006) and for 78.4 percent (65.4 proxy indicator for the access dimension of percent in 2006), the score was acceptable. food security and nutrition intake. The The score is a composite score based on Western Province was the most food dietary diversity, food frequency, and insecure province in 2009, followed by the relative nutritional importance of different Southern Province. food groups and it is considered a good 1 Figure 6. Food Availability Indicators in Rwanda 6b Recommended Dietary Allowances (RDA) in terms of 6a The Food Balance Sheet recorded improvements. energy were met since 2008. But disparities across provinces and over seasons remain. 2007B 2008A 2008B 2009A 2009B 2010A 2010B I. AVAILABILITY =1+ 2+3+4 1,022.4 940.7 1,104.3 1,141.1 1,227.5 1,379.2 1,403.8 Kcals per capita per day 3,300 1. Stock 0.0 0.0 4.4 0.0 0.0 0.0 7.0 South 2. Crop production 1,022.4 1,161.6 1,208.3 1,406.2 1,345.1 1,529.1 1,467.5 West 2. Expected Crop production C n.a. n.a. n.a. n.a. n.a. n.a. 81.0 North 2,900 East 3. Animal production n.a. n.a. 72.9 na 84.2 79.5 80.6 Countrywide 4. Losses n.a. -220.8 -181.2 -265.0 -201.8 -229.4 -232.3 2,500 II. NEEDS = 5 1,123.5 1,121.2 1,156.0 1,153.7 1,189.6 1,228.1 1,245.6 5. Consumption 1,123.5 1,121.2 1,156.0 1,153.7 1,189.6 1,228.1 1,245.6 III. Balance/Deficit = I-II -101.1 -180.4 -51.7 -12.5 37.9 151.1 158.2 2,100 6. Imports 112.8 103.2 103.2 103.2 n.a. n.a. n.a. RDA 7. Food aid 28.2 26.0 36.2 n.a. n.a. n.a. n.a. 1,700 IV. TOTAL = III + 6 + 7 39.9 -51.3 87.7 90.6 37.9 151.1 158.2 6c Nevertheless, RDA in terms of protein and … 6d … lipid are not being met countrywide yet. 80.0 Lipids per capita per day Protein per capita per day 45.0 RDA 30.0 60.0 South 15.0 West North East Countrywide 40.0 0.0 South West North East Countrywide Source: Ministry of Agriculture 6|P a g e At the same time, food imports, specifically percent in 2010. These trends reflect in of rice and sugar, formed an increasing part equal part local food market conditions and of overall imports (Table 2). In 2010 alone, price trends handed-through from world the value of food imports increased by 27.1 food prices. percent, accounting for 11.6 percent of total import values and 36.1 percent of values of 1.4 EXPORT CROPS consumer goods imports. This increase in In the past five years export crops food imports is, however, not coinciding contributed on average 48.1 percent to with decreasing food security, as it Rwanda’s total export earnings. They happened during successive good harvest accounted during the same time for 1.1 years. It appears to be rather related to a percent of GDP. Coffee and tea are the shift in food consumption patterns, where major export products, concentrating more richer urban households increasingly than 90.0 percent of the value of export consume imported food products, such as crops. While the Government started the rice and sugar, while rural subsistence promotion of non-traditional export crops, households continue to consume traditional in order to stimulate growth and increase staples, such as cassava and bananas. foreign exchange earnings, the heavy reliance on coffee and tea remained Table 2. Imports of Food Products (Percent) 2010 Growth Share of 2010 Consumer Goods Share of 2010 Imports unchanged to date. Imported products Volume Value FOB Volume Value FOB Volume Value FOB CONSUMER GOODS 30.4 18.2 39.4 32.0 1.4.1 HORTICULTURE Food product 40.2 27.1 79.5 36.1 31.3 11.6 Meats and fish 41.9 56.1 1.5 1.0 0.6 0.3 In an attempt to create a more-diversified Fats and oil of animal or plant ori -4.0 -5.4 7.3 7.9 2.9 2.5 Vegetables, fruits and spices 10.0 43.7 6.1 1.3 2.4 0.4 export sector, efforts are being made to Cereals, flours and seeds 78.4 33.7 42.9 11.2 16.9 3.6 promote horticultural crops, including Various food preparations -9.8 3.2 2.8 2.9 1.1 0.9 Salt 0.6 -12.9 7.8 0.8 3.1 0.3 fruits, vegetables, and cut flowers; essential Sugars and sweets 48.2 79.8 10.6 10.2 4.2 3.3 oils such as petunia and geranium; Source: Banque Nationale du Rwanda (BNR) macadamia nuts; vanilla; and silk. Given It is also noteworthy that food prices are favorable climate and soil conditions, the most important driver of inflation in Rwanda has the potential to develop a Rwanda. Food consumption accounts for 35 vibrant horticulture industry. High-value percent of the total Consumer Price Index export crops, such as passion fruit, desert (CPI) basket. Food prices declined during bananas, Japanese plums and Bird’s Eyes 2009 and 2010, following the height of the Chilies could be produced by Rwanda and global food crisis which impacted Rwanda are in high demand at the international indirectly towards the end of 2008. From the market. Other exotic fruits and vegetables peak in food inflation of 30.9 percent in also have the potential to be grown in December 2008, it declined persistently to Rwanda’s fertile and diverse terrain. an average of 16.9 percent in 2009 and 1.8 7|P a g e Overall, the production volume of premium prices at the Mombasa auctions, horticulture crops remains low as it is done its main market destination. A significant by groups of small-scale producers. Their share of medium to high quality teas is sold cooperative structures are yet unable to directly to retail stores in Europe. establish the right incentives for addressing Rwanda’s tea production and marketing the market expectations of producing at systems continue to be dominated by state- high volumes with necessary quality owned companies. Tea is cultivated mainly standards. As the production is capital on large plantations, which are owned and intensive, they also face challenges in managed by about a dozen tea factories that accessing the needed resources to sustain process green tea into black tea. the supply chain (input, production, post Approximately two-thirds of the tea harvest, processing and export). produced in Rwanda is grown on industrial Furthermore, Rwanda already experienced a estates belonging to a state agency, OCIR temporary ban on exports to the European THE10 and a few private investors. The Union because of failure to comply with remaining one-third is grown by small-scale phytosanitary standards. private growers. Current tea plantations Investments in horticulture did not total an area of 17,000 ha. materialize yet as potential investors still Figure 7. Tea Export Values and Prices face a number of unresolved issues, such as 60.0 3.0 Million USD Export Values land shortage and inadequate infrastructure. Average Price, Right scale USD/kg It appears that without more concerted efforts to address investment challenges in 40.0 this promising export sector Rwanda is likely 2.0 to continue to depend on traditional export 20.0 crops of coffee and tea. 1.4.2 TEA 0.0 1.0 Rwanda produces one of the highest quality teas in the world. In 2009 tea became Source: BNR Rwanda’s main export by value, generating Like the horticulture sector, the tea sector US$48.2 million (and US$55.7 million in faces difficulties in attracting investors that 2010). Total tea production increased on could bring in new technologies and provide average 14.0 percent per annum during access to established distribution chains. At 2006-2010. At the same time, tea exports by volume nearly doubled, thanks to Rwanda 10 OCIR (Office des Cultures Industriels du Rwanda)-THE was tea’s high quality. High quality is also the established by the Government to spearhead policy reason for Rwanda tea regularly fetching development, regulation, promotion and smallholder support in the sector. 8|P a g e the same time, there is a rapid increase in coffee (FWC), owing to an increased number demand for high quality and niche tea and of processing factories and washing stations, the global consumption of black tea is (one in 2002, 74 in 2006 and 188 in 2010). quickly growing. It is in Rwanda’s interest to Whereas the FWC accounted for less than further increase black tea production and to one percent in 2002, it reached 12 percent diversify into higher value niches, such as in 2006 and exceeded 20.0 percent of total orthodox and green tea, aided by foreign coffee production in 2010. However, that investments share remains still far below the EDPRS target of transforming 85.0 percent of coffee 1.4.3 COFFEE production into FWC by 2012. Nowadays, Rwanda coffee is answering Figure 8. Coffee Export Values and Prices growing demand for high quality bourbon 60.0 3.5 Arabica. In the 1990s, Rwandan coffee was US$ million Export Value US$/Kg Average Price, Right Scale classed below Grade C, making it unsalable on the global market and buyers paid 40.0 3.0 US$0.33 per kilogram. Rwanda coffee was unknown in the specialty/high-value coffee sector until in 2001 MARABA™ coffee 20.0 2.5 achieved high scores at international coffee tasting competitions, placing it well above the threshold level for a specialty coffee.11 0.0 2.0 Since then, Rwanda coffee won praise by the American and European specialty coffee Source: BNR industry. Rwanda coffees have been Production volatility threatens Rwanda’s distributed in Europe (through Sainsbury’s in potential of becoming a key supplier of the UK) and Starbuck’s in the US. high-quality coffee. First, volatility in coffee production leads to the underutilization of Rwanda coffee achieved record prices in washing station capacity. Second, it also 2010. Between 2006 and 2010 annual contributes to insufficient levels of average unit prices increased by 51.2 production to attract global demand. This percent from US$2.03 to US$3.07 per makes Rwanda coffee invisible to the bulk kilogram (Figure 8). This trend was mainly market. In 2009, washing stations utilized driven by a growing share of fully washed only 43.0 percent of their capacity. At the same time, Rwanda contributed less than 11 MARABA™ coffee is a bourbon variety of the Coffee Arabica species which was processed by the first washing one percent to the worldwide exported station built at Maraba, in Southern Province in 2002. This coffee. Rwanda’s coffee production needs to washing station was built with assistance from the Partnership for Enhancing Agriculture in Rwanda through be optimized by minimizing the oscillation of Linkages, a project executed by Michigan State and Texas the production cycle (Box 2). A&M Universities. 9|P a g e Box 2: Coffee Production Cycle 1.5 SEEDS FOR GROWTH Over the past decade, coffee exhibited large volatility in production and foreign exchange earnings. Production also In order to fully realize its strategic role, the remained below the levels of the early 1990s. Peaking at 26,291 agriculture sector will need to address a tons in 2006, coffee production has been oscillating from year to year, following a downward trend. Overall, coffee recorded a 27 number of urgent challenges, including: (i) percent drop in production from 2006 to 2010. This sharp volatility is attributed to the natural coffee cycle: (i), the yield of preserving soil fertility and preventing soil the coffee tree peaks after 5 to 7 years, and (ii) there is a 18 to erosion, (ii) large irrigation needs, (iii) poor 24 months lag between plantation and harvest. While the investment response to price change is very quick, the output post-harvest management, and (iv) limited response to investment is slow. As a result, the extra supply might arrive on the market when prices are on the decline, access to financial services. These could magnifying the downturn in the coffee cycle. impinge negatively on agricultural 180 productivity, despite the progress achieved Growth 2001=100 in recent years. Government, in partnership 160 with donors, started to put in place a series 140 of measures to deal with these challenges. Most of these measures are being 120 undertaken under the second PSTA and they truly represent seeds for higher future 100 agricultural and overall growth. 80 1.5.1 SOIL FERTILITY AND EROSION ISSUES Source: OCIR-CAFÉ and BNR Heavy demographic pressure resulted in Another challenge is linked to coffee quality many, very small and scattered farms. More consistency and the need to better target than 80.0 percent of households hold less the high-value coffee market. Washing than 1.0 ha of land. This land is over- stations must be more selective about the cultivated, leading to the disappearance of coffee cherries they wash in order to traditional techniques of soil fertility maintain and improve the overall quality of regeneration such as fallowing practices. In Rwanda coffee. Fully washed low grade addition, the cultivation on slopes up to and cherries do not add any more value than above 55 percent steep is unavoidable given semi-washing the same cherries. Greater that 80 percent of arable land is on a slope coffee quality consistency would enable in Rwanda. Encroachment on marginal lands companies to enter the specialty coffee on steeper slopes results in heavy erosion.12 segment. This segment enjoy higher and more stable prices, as compared to the commercial coffee segment, which is to a 12 About 40.0 percent (800,000 ha.) of Rwanda’s land is larger extend subject to global commodity classified by the Food and Agriculture Organization as price swings. having a very high erosion risk, 37.0 percent requires soil retention measures before cultivation, and only 23.0 percent of the cultivated land is more or less free from risk of erosion. Rwanda loses 1.4 million tons of soil per year, 10 | P a g e Government has started initiatives to reduce watershed approach to prevent soil erosion soil erosion and restore soil fertility and and improve productivity on hillsides these are implemented through PSTA II. (thereby reducing the need to encroach on marginal lands). Other programs aim at the Soil fertility rehabilitation of hillsides; and Government’s Under the CIP program, a land use extensive radical terracing (agricultural and consolidation component encourages social protection) program is covering now farmers with adjacent land to grow the same large tracts of the country. crop. This will enable farmers to make use of economies of scale and increase access quality inputs, such as improved seeds and fertilizers. Government installed a fertilizer voucher system for maize and wheat farmers. After dealers deliver inputs to the farmer at a predetermined subsidized price, they are paid the subsidy on the agro-input by microfinance institutions engaged by CIP. Source: Rural Sector Support Project Rwanda In addition, the GIRINKA program will increase the use of farm yard manure for soil 1.5.2 IRRIGATION NEEDS fertility improvement. Projects supported both by the Dutch Government and United Rwandan agriculture is predominantly rain States Agency for International fed. As a result, droughts, irregular rainfalls Development (USAID) support the Ministry and landslides, and climate change-related of Agriculture in these aspects, but many phenomena are major concerns for its Non-Governmental Organizations are also productivity. Through PSTA II, Government is active in this area such the One Acre Fund, focusing on providing irrigation to hillside World Vision and Care International. farms and on increasing the water retention capacity of watersheds. There are a number Soil erosion of projects funded jointly by the Government and Developments Partners to Erosion control programs are being this effect: (i) the Rural Sector Support aggressively applied, such as progressive or Project (marshland irrigation); (ii) the LWH radical terraces. For instance, the Project; (iii) the Project d’Appui au Government’s LWH program, financed by Développement Agricole de Bugesera; (iv) International Development Association and the Kirehe Watershed and Agricultural other donors, uses a comprehensive Management Project, (v) the Project to Support PSTA II implementation, and (vi) the equivalent to a decline in the country’s capacity to feed Hillside Irrigation Project in Bugesera. 40,000 people per year (Republic of Rwanda, 2009) 11 | P a g e The Government has also initiated a number banking system also imposes heavy of ambitious irrigation projects like the collateral requirements and poses Immediate Action Government Funded inappropriate lending conditions, such as Irrigation Project and the Gishwati Land and periodicity of repayment not linked to the Water Management Project. Recently, a agricultural cycle. In 2010, the agricultural Task Force was established for Irrigation and sector received only 2.1 percent of total new Mechanization resulting in a pledge to authorized loans. increase the irrigated area both in the Mechanisms to increase access to financial marshland and on the hillside from 20,000 services in the agriculture sector mostly ha to 100,000 ha by the year 2017. benefit the export and livestock subsectors. 1.5.3 POST HARVEST MANAGEMENT Some of these mechanisms comprise the Government Agricultural Guarantee Fund, Poor post harvest management results in the World Bank’s Rural Investment Facility I the loss of up to 15 percent of total & II, and the Belgian Horticultural production and poses a big challenge to Investment Fund and similar schemes are further productivity increases, if not embedded in various other projects. addressed. Government is supporting post- However, they remain largely uncoordinated harvest infrastructure through farmer and and did not allow agricultural finance to take cooperative investments in storage facilities, root yet. In 2010, Department for drying grounds, as well as the procurement International Development’s Access to of silos and grain stocks. These activities are Finance Rwanda Program established a handled by the newly created Storage and Company Limited by Guarantee to Post Harvest Task Force in the Ministry of coordinate efforts to deepen financial Agriculture. USAID is also supporting post literacy and financial access. The purpose is harvest development in the sector through to increase access to financial services for the Post Harvest Handling and Storage poor rural and urban people, especially Project. women, and for Micro, Small and Medium 1.5.4 ACCESS TO FINANCIAL SERVICES Enterprises. In March 2011, the Agricultural Finance Support Facility launched a project The agriculture sector suffers from to support the Banque Populaire du Rwanda insufficient access to finance and in order to build its capacity for agricultural insufficient investment capital for farming, finance, thus increasing access of agro-processing and export development. smallholder farmers to financial services. Low productivity and high vulnerability of the agricultural sector make banks reluctant to offer financial services to rural farmers, largely due to lack of information on profitability of value chain activities. The 12 | P a g e PART 2: RECENT ECONOMIC DEVELOPMENTS This part focuses on recent macroeconomic developments during 2010, the year after the global economic crisis impacted the country most. Rwanda’s economy grew in 2010 at a healthy 7.5 percent, two percent higher than the EAC. A prudent fiscal stance with strong focus on priority expenditures, and assisted by continued high grant financing from donors, contributed to the country’s remarkably stable macroeconomic framework in a difficult external post-crisis environment. The outlook for a full recovery of Rwanda’s economy during 2011 is cautiously optimistic as some lead growth indicators, like credit to the private sector, performed in 2010 less well than expected. The outlook also remains dependant on effects of yet again increasing international fuel and food prices and the second harvest outcome. Source: World Bank Archives Rwanda 2.1. REAL SECTOR TRENDS 2009/1013 to around 26.0 percent. This stimulus was partly financed by an increase Rwanda’s economic recovery continued in donor aid. during 2010 at a high pace. As of December 2010, year to year GDP growth rates were Economic growth was driven by services steadily increasing, but did not return to pre- and industry growth (Figure 1). Agriculture crisis 2008 levels yet. Nevertheless, the sector growth slowed down to 4.6 percent, overall growth outturn at 7.5 percent for despite price and volume increases for key 2010 is impressive. This growth was to a export crops and increased food crops large extend a result of a sizable fiscal stimulus, increasing expenditures by around 13 This included the revised 2008 budget at mid-term 3.0 percent of GDP between 2008 and review, 2009 and 2009/10 budgets. 13 | P a g e production. By end 2010, the services sector Figure 9. Growth in the Agriculture Sector (Percent) 30.0 exhibited growth of 9.6 percent benefiting 2008 2009 2010 from large public expenditures (education, 20.0 health and public administration services). After being the most impacted sector by the 10.0 global downturn, the industrial sector grew 0.0 at 8.4 percent. But industry’s growth remained below 2008 levels, in particular, -10.0 for the main subsector construction, cautioning the economic outlook. -20.0 Source: NISR Overall sector trends in 2010 can be The services sector led the way with 9.6 summarized as follows: percent growth, contributing the largest Agriculture sector growth slowed down share to GDP (45.8 percent) (Figure 10). to 4.6 percent (Figure 9) while food crops Finance and insurance benefitted largely production increased and export values from increased insurance activities in the for crops increased, owing to high industry sector, and awareness campaigns international prices for Rwanda’s two encouraging life insurance (Table 3). main export goods, coffee and tea. Education, health and public administration Coffee production increased by 21.6 services grew by 14.6 percent, thanks to the percent, benefitting from favorable high momentum of public spending in these weather condition and increased use of areas, partly aided by increased donor fertilizers. International coffee prices inflows. Hotel and restaurants’ activities remained stable, averaging US$3.08 per exceeded pre-crisis levels, benefiting from a kilogram. Tea production increased by record tourist arrival number in 2010.14 15.2 percent, partly attributed to the Communication services grew at a healthy privatization of some tea factories which 8.7 percent due to an increase in mobile led to productivity gains, but also the phone penetration. The number of mobile eradication of a tea plant disease which phone subscribers increased by 46.1 percent had plagued some tea plantations in between December 2009 and 2010. 2009. Food crops production increased, Table 3. Insurance Activities in Rwanda (Billion of Rwf) benefiting from favorable weather 2008 2009 2010 conditions and ongoing intensification Gross premium 35.9 47.9 53.8 Gross premium/GDP 1.4% 1.6% 1.6% programs. The modest increase was a Assets 80.1 102.9 119.0 result of the decline in domestic food Assets/GDP 3.0% 3.5% 3.6% prices. Livestock reported a modest Source: BNR increase despite the ongoing Girinka Program. 14 Rwanda Developemnt Board, 2011 14 | P a g e Figure 10. Growth in the Services Sector (Percent) Figure 11. Growth in the Industry Sector (Percent) 2008 2009 2010 30.0 Wholesale and retail trade 2008 2009 2010 Education 20.0 Transport, storage, communication Public administration 10.0 Finance, insurance Health 0.0 Hotels and restaurants Real estate, business services -10.0 Other personal services -10.0 0.0 10.0 20.0 30.0 -20.0 Source: NISR Source: NISR The industry sector grew at a healthy 8.4 Year-on-year inflation reached 2.3 percent percent, aided by a strong recovery in for headline inflation and 1.5 percent for manufacturing (Figure 11). Manufacturing underlying inflation, respectively. This trend activities revived with growth exceeding pre- was owed to the good performance in crisis 2008 levels, dominated by the foods domestic food production and a decline in and beverages industry, imports of industrial import prices. materials and new credits to manufacturing Domestic petroleum prices have been activities. Mining disappointed, contracting adjusted periodically in response to world by 10.8 percent. The modest quantity oil market developments. A committee exported benefited from the increase in consisting of Government and private sector international prices. Construction growth representatives meets monthly to discuss remained reserved. While overall growth and determine fuel prices per liter at the represented through this sector is pump. In 2010, fuel pump prices were encouraging, consideration of construction reviewed six times. During the first half of as a lead growth indicator is cautioning the 2010, prices were raised twice, in January overall outlook. and in May. Between July and September, prices were reduced twice, and this time 2.2. PRICE TRENDS fixed separately for premium super and for In 2010 inflation declined and converged to diesel. Since October 2010, fuel prices below pre-crisis levels. As of December climbed steadily and reached Rwf952 for 2010, the CPI stood at 0.2 percent, premium super and Rwf946 for diesel in retreating from its peak level of 22.3 percent December 2010 (Figure 13). Overall, pump at end-2008 (Figure 12. Inflation Trends prices increased by 7.3 percent for premium 2007-2010). super and 6.7 percent for diesel. 15 | P a g e Figure 12. Inflation Trends 2007-2010 Figure 13. Domestic Fuel Price Trends in 2010 (Rwf) CPI Imported Goods Local Food and non-alcoholic beverages 960 952 35.0 944 946 940 25.0 925 933 920 920 918 917 15.0 913 5.0 887 887 880 (5.0) Nov-07 Nov-08 Nov-09 Nov-10 Juil-09 May-07 May-08 May-10 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Jul-08 Mai 09 Jul-07 Jul-10 Jan-07 Jan-08 Jan-09 Jan-10 Premium Diesel Source: BNR and NISR Source: Ministry of Commerce 2.3. FISCAL TRENDS15 Fiscal policy continues to inject a stimulus The overall fiscal deficit (excluding grants) in 2010/11. This is reflected in continued is expected to increase to 13.8 percent of high levels of spending in order to support GDP, from 13.2 percent in 2009/10. Donor the nascent recovery. Total expenditures are inflows are planned to remain a significant projected to increase by a 9.5 percent to source of budget financing, but at Rwf984.0 billion (Table 4). A major increase decreasing level. Both budgetary and capital in domestic capital investment is planned, grants are projected to decrease in the pushing capital expenditure to 41.1 percent 2010/11. The external financed budget share of the budget. Total expenditure and net is planned to decline by one fifth to 35.2 lending are projected at 27.8 percent of percent down from 43.9 percent in 2009/10. GDP. Expenditure coverage by total Allocation to debt repayment is expected to revenues (including grants) is expected to increase by 25.7 percent in terms of budget decline to 84.0 percent from 86.7 percent of share, as Government stock of domestic 2009/10. securities issued in 2010 and a 3-year bond will reach maturity in 2011. 15 The 2010/11 budget was Rwanda’s second budget following the EAC fiscal year from July to June. This budget was presented to Cabinet on April 15, 2010 and approved by Parliament in its session of June 24, 2010. The State Finance Law was gazetted on June 30, 2010. 16 | P a g e Table 4. Government Budget 2009/10 and 2010/11 (Billion 2010/11 budget projections are based on of Rwf) FY 2009/10 FY 2010/11 four broad priority areas of spending as Original Revised Actual Budget defined by the EDPRS (Annex 3). Budget Budget Revenue and grants 743.7 779.6 800.8 826.1 The human development and social Domestic revenue 401.50 385.1 391.5 479.8 Tax revenue 368.00 369.4 376.5 457.6 sectors cluster including health, Direct taxes 147.1 144.5 148.9 179.0 education, social protection and youth, Taxes on goods and services 183.1 191.2 195.1 234.8 Taxes on international trade 37.8 33.6 32.6 43.8 culture & sports, and, is continuing to Non-tax revenue 33.5 15.8 15.0 22.1 receive the lion’s share of Government Total Grants 342.2 394.5 409.3 346.4 Budgetary grants 215.8 268.1 283.0 229.6 spending (31.1 percent). The EDPRS Capital grants 126.4 126.4 126.4 116.8 target stands at 34.2 percent. Although Total expenditure and net lending 838.0 899.0 819.0 984.0 Current expenditure 459.3 478.8 457.1 517.1 its absolute spending increases by 6.7 Wages and salaries Purchases of goods and services 107.7 107.5 108.2 112.3 106.9 103.9 120.6 120.5 percent, this represents a 0.8 percent Transfers 178.9 190.2 179.6 195.5 decline in terms of share of total Exceptional social expenditure 51.7 54.7 51.8 67.0 Interest payments 13.4 13.4 14.8 13.5 expenditure compared to 2009/10. Domestic Int (paid) 8.6 8.6 10.3 9.0 External Int (paid) 4.8 4.8 4.5 4.5 The Governance and sovereignty cluster Capital expenditure 348.1 356.4 311.5 404.0 is seeing its allocation decrease from Domestic 153.1 161.4 154.0 224.6 Foreign 195.0 195.0 157.5 179.4 36.5 percent to 30.1 percent in budget Net lending 7.0 38.4 28.2 31.2 Debt repayment 15.2 17.0 11.1 23.4 share (9.8 percent in absolute terms, and Domestic 9.9 11.7 7.0 15.1 17.5 percent in terms of total Foreign 5.3 5.3 4.1 8.3 Arrears 8.4 8.4 11.1 8.3 expenditure compared to 2009/10), 1 Overall Deficit -79.1 -102.4 -7.1 -134.5 converging to the EDPRS target of 29.4 2 79.1 102.4 7.1 134.4 Deficit Financing percent This cluster comprises general Foreign financing (net) 63.3 63.3 27.0 54.5 Drawing on GoR account 0.0 0.0 0.0 59.1 public services, defenses and public Domestic financing (net) 15.8 39.0 -19.9 20.8 order and safety functions. Source: MINECOFIN 1 Revenues and grants minus total expenditure and net lending (excluding debt repayment). The allocation to the infrastructure 2 Net of debt repayment. cluster increases in terms of budget The mid-term review of the budget was share. But instead of converging to the approved by Parliament on February 28, EDPRS target of 19.7 percent, spending is 2011. The overall budget envelope remained planned at 24.6 percent of the budget up the same, with some reallocations within from 21.5 percent in 2009/10. This that envelope. It mainly accommodated a corroborates with the Government’s goal for alleviating infrastructure change in financing from donors, i.e. the bottlenecks (e.g. broadening electricity disbursement delay by some donors was access and completing the fiber optic compensated by extra budget support program, etc.). resources provided by the World Bank and For the productive capacities cluster a COMESA reimbursement for trade tax losses more than 50.0 percent increase in incurred after the implementation of the allocation is planned, from 10.0 percent EAC Common External Tariff Framework in to 14.2 percent as a share of the budget, July 2010. 17 | P a g e thus getting close to the EDPRS target of Revenue collection exceeded 16.7 percent. This cluster comprises the Government’s targets for 2009/10, key sectors of agriculture and trade & recording a surplus of Rwf6.4 billion industry, through which issues of compared to the revised budget. This growing balance of payment deficits was largely a result of the need to be addressed. implementation of tax administration reform measures. However, the Budget execution for 2009/10 totaled collection of international trade taxes Rwf815.0 billion against Rwf898.0 billion of and non-tax revenues reported the revised budget, leading to an overall shortfalls. The proportion of direct taxes execution rate of 90.8 percent versus the and taxes on goods & services has been revised budget and 97.3 percent the original continuously rising over the last three budget (Table 4). years, whereas there was a reduction in the share of taxes on international trade For current and capital expenditures, as a result of the reduction in tariffs execution rates were 95.5 percent and following the EAC Common External 87.4 percent, respectively. The lowest Tariff Framework. execution rate was recorded for foreign Donor inflows recorded a surplus of funded capital expenditures with 80.7 Rwf14.9 billion in budgetary grants due percent, followed by purchases of goods to unforeseen reimbursement from the & services with 92.5 percent. In the UN for the Peace-Keeping Operation in former case this was attributed to a Sudan as well as exchange rate delay in financing agreements for fluctuation of some donor currencies Government’s strategic investment (the SDR, the Euro and the British Pound projects and in the latter to procurement against the US$). delays. Interest payments reported an Financing. Due to the lower execution overspending of ten percent, particularly rate of the upward revised budget, the for domestic payments. fiscal year ended with an overall lower The Government incurred higher than projected deficit. Net external interest costs due to the fact it had to borrowing totaled Rwf27.0 billion, maintain high overdraft levels at Central compared to the planned Rwf63.3 Bank and also sell a large amount of billion. Also, domestic financing was domestic security instruments to finance negative, as Government re-paid priority expenditures as donor domestic non bank debt in the amount disbursements were delayed. of Rwf19.9 billion (Table 4). Furthermore, the Government had to incur additional interest burden from bank loans and advances acquired by its contractors and suppliers due to payment delays. 18 | P a g e 2.4. EXTERNAL SECTOR TRENDS with 8.8 percent. More than 50.0 percent of European coffee exports were The trade balance narrowed marginally, sold in Switzerland. However, the thanks to strong demand and high volume of the European market declined international prices for key export crops. In albeit export values continuously 2010, export values reported a 33.2 percent increased. In terms of prices, Rwanda increase benefiting from high prices at coffee was well valued in Japan where international market, but remained below the price averaged US$9.1 per kg the pre-crisis 2008 levels (Table 5). Export followed by Australian market with volumes increased by 9.1 percent. US$6.7 per kg. 2010 was the first year Agriculture crops constituted the major when Rwanda coffee export was source of exports earning, generating 49.4 extended to the Australian market percent, followed by minerals with 28.0 (Figure 14). percent. Re-exports significantly increased, Tea exports benefited from a 15.2 percent increase in export volume and a dominated by cassiterite (69.1 percent) slight price increase. In terms of which is re-exported to Switzerland. Other destination, almost 90.0 percent of re-exported products include petroleum Rwanda Tea is sold at the Mombasa products and vehicles exported to the auction. Democratic Republic of Congo (DRC) and Mining exports performed well in 2010, Burundi and machines & engines exported benefiting from high international to EAC countries. market prices, while output in the Table 5. Main Export Products (US$ Million) mining sector did not pick up. Export 2010 2007 2008 2009 Q1 Q2 Q3 Q4 Total earnings from minerals recorded a 27.8 35.7 48.1 37.3 1.4 7.8 28.9 18.0 56.1 percent increase, while export volumes Coffee Tea 31.5 45.0 48.2 17.4 15.6 11.1 11.6 55.7 fell by 6.7 percent. Minerals 70.6 91.7 55.7 11.3 15.7 18.5 25.7 71.3 Figure 14. Average Price of Rwanda Coffee, 2010 (US$) Cassiterite 32.0 41.3 28.6 5.5 9.8 11.0 16.0 42.2 Coltan 19.2 36.0 20.2 4.1 3.9 5.6 4.8 18.5 Wolfram 19.4 13.4 5.8 0.8 1.5 2.0 2.8 7.1 Reexports 18.0 52.8 20.6 8.4 10.6 12.8 4.1 35.9 TOTAL EXPORTS 176.8 267.7 191.0 48.0 58.0 79.9 68.6 254.5 Source: BNR Coffee exports benefited from an increase in global coffee prices combined with increased production (see Part 1). Europe remained the main destination for Rwandan coffee with about 85.8 percent of the volume Source: BNR exported, followed by North America 19 | P a g e In 2010, import volumes increased by 17.7 Informal cross-border trade is becoming percent while values rose by 8.8 percent significant for Rwanda. Since 2009, The (Table 7). This trend was mainly due to the Ministry of Commerce, Central Bank and increase in volume recorded by consumer NISR conduct a survey on informal cross and intermediary goods. Food products border trading. Rwanda has been recording occupy the largest share with 36.1 percent a positive cross border trade balance and in of the value of imported consumer goods, or 2010 the trade balance increased by 16.9 11.6 percent of total import values. percent to US$27.0 million (up from US$23.1 Imported food products mainly comprise million in 2009) (Table 6). This trade is sugar & sweets and cereals, flours & seeds. dominated by food crop products and live Large imports in cereals, flour and seeds are animals with the main trading partners are primary due to the fact that local production being DRC and Uganda. remains low, especially for rice, compared to Table 6. Informal Cross Border Trade (Million US$) consumption needs. Intermediary goods saw 2009 2010 a 10.5 percent increases in values, Exports 46.6 12.6 10.9 12.2 13.3 48.9 contributing 31.2 percent to the increase of Imports 23.5 4.7 4.9 6.6 5.9 22.0 Trade Balance 23.1 7.9 6.1 5.6 7.4 27.0 total import values. This reflected significant Source: BNR demand of the industry sector, especially for manufacturing and construction activities. Energy products reported a 21.4 percent increase in value in consequence of high international fuel prices. Table 7. Evolution of Imports by Economic Classification, Value in Million of US$ and Volume in Tons 2009 Q1-2010 Q2-2010 Q3-2010 Q4-2010 Total 2010 Volume Value Volume Value Volume Value Volume Value Volume Value Volume Value CONSUMER GOODS 359,314.1 318.1 122,470.5 93.0 108,878.3 79.9 116,669.5 92.5 120,453.9 110.6 468,472.2 376.0 Food product 265,598.9 106.7 101,152.9 37.6 88,540.3 30.7 93,253.3 32.8 89,541.1 34.5 372,487.7 135.7 Health and care 26,239.5 97.5 6,032.1 16.8 6,641.0 18.4 7,651.1 27.8 10,443.9 22.0 30,768.1 85.0 CAPITAL GOODS 53,136.1 337.4 10,140.4 77.1 9,038.5 69.8 11,341.0 83.8 12,556.4 84.8 43,076.4 315.5 Transport Materials 8,837.0 49.7 1,584.6 10.7 1,618.3 11.7 1,672.1 11.7 1,897.6 13.1 6,772.6 47.2 Machines, devices and tools 18,128.1 223.8 4,753.4 50.6 4,257.3 45.3 5,245.0 52.4 5,368.9 49.2 19,624.6 197.5 INTERMEDIARY GOODS 408,677.0 284.8 98,279.3 67.0 101,360.0 77.9 128,879.4 85.4 153,125.2 84.3 481,643.9 314.6 Construction materials 243,263.8 117.1 52,161.3 25.2 56,578.9 32.9 78,263.7 36.1 100,847.5 34.8 287,851.4 129.0 Industrial products 108,511.6 111.1 39,081.6 31.6 40,576.6 32.3 30,985.2 30.9 35,807.0 34.5 146,450.4 129.4 ENERGY PRODUCTS 189,347.3 138.2 46,418.1 38.3 49,564.2 43.3 48,148.0 40.6 51,654.7 45.4 195,784.9 167.7 Fuel 182,971.7 129.1 45,014.7 36.7 48,037.1 41.4 47,012.9 38.6 50,102.6 43.1 190,167.4 159.8 TOTAL IMPORTS 1,010,474.4 1,078.4 277,308.4 275.4 268,840.9 271.0 305,037.9 302.3 337,790.2 325.1 1,188,977.4 1,173.8 Source: BNR 20 | P a g e In 2010, the tourism sector recorded expected investment deals are still awaiting record visitor numbers to National Parks, finalization. International reserves resulting in a remarkable recovery from the remained at comfortable levels (5.1 months receding numbers following the global of imports of goods and services). downturn in 2008-2009. The number of Figure 15. External Developments (Percent of GPD) national park visitors recorded a 17.8 Exports Imports Trade balance (right scale) Current account balance (right scale) percent increase exceeding the pre-crisis 20.0 0.0 level of 2008 (Table 8). Overall, Rwanda -2.2 hosted 666,001 visitors in 2010. Especially, 15.0 -4.9 -4.0 the number of non African increased by -7.1 -7.5 19.1 percent. Total visitors are estimated to 10.0 -8.0 have generated US$200 million, recording a 14.3 percent increase compared to US$175 5.0 -12.0 million of the year before. 0.0 -16.0 Table 8. National Park Activities 2007 2008 2009 2010 Est. Akagera Volcanoes Nyungwe Total Source: BNR 2007 18,001 16,323 3,981 38,305 2.5. EXCHANGE RATE TRENDS 2008 19,783 18,490 4,810 43,083 2009 18,865 14,890 4,695 38,450 The Rwandan Frank depreciated against all 2010 23,372 16,180 5,755 45,307 major currencies. In March 2010, Central Source: RDB Bank introduced an exchange rate corridor The current account deficit, including framework as a transitional measure current transfers, slightly widened to 7.5 toward a market based exchange rate percent of GDP in 2010, from 7.2 percent in framework. The framework is characterized 2009. The trade deficit narrowed from 14.5 by more flexibility in the movement of percent of GDP in 2009 to 14.0 percent in foreign exchange. Previously, the exchange 2010 (Figure 15). Net remittances increased rate system was classified as a conventional to US$65.1 million from US$53.1 million in fixed peg relative to the US$. Since April 2009 comparing to the record level 2010, the Rwf depreciated by 3.7 percent recorded in 2007. Net official transfers against the US$, a larger movement than increased in 2010 by 8.9 percent, reflecting observed over the entire year 2009 (2.2 a 15.3 percent increase in budgetary percent). Throughout 2010 the Rwf showed support transfers and a 10.1 percent a mix of movements against other major decrease in humanitarian aid. Total current international currencies (the Euro and the transfers increased by 9.6 percent, but this British Pound) which originated in the increase was not enough to outbalance the strengthening of the US$ during that period trade deficit. Preliminary data estimated a (Figure 16). By end 2010, the Rwf had 64.3 percent decrease in foreign direct depreciated by 1.6 percent against the Euro investments, mainly because a few large 21 | P a g e and by 6.0 percent against the British economy cheaper. Commercial banks were pound. The Rwf depreciated against all EAC provided with a negative incentive to invest currencies, other than the Burundian Franc in the money market and instead provide (see Table 9). credit to private sector. However, banks have maintained their lending interest rates Figure 16. Nominal Exchange Rate of Major Currencies, end March=100 persistently high (Figure 17), following a 112.0 cautious credit stance. Figure 17. Lending and Deposit Rates (Percent) 20.0 100.0 15.0 10.0 5.0 88.0 0.0 Rwf/USD Rwf/Euro /Rwf/GBP -5.0 Source: BNR -10.0 Table 9. Variations of EAC Currencies/Rwandan -15.0 Franc (+Appreciation/-Depreciation) in 2010 Real Deposit rate Real Lending rate UGS/Rwf TZS/Rwf BIF/Rwf KES/RWF Source: BNR Quarter 1 -6.7 -2.3 2.2 -1.7 Quarter 2 -7.1 0.0 2.1 -3.0 Financial sector soundness indicators Quarter 3 0.9 -7.5 0.7 1.3 improved in 2010. The capital adequacy Quarter 4 -2.1 3.3 -0.3 1.1 Year 2010 -14.4 -6.6 4.8 -2.3 ratio on a consolidated basis stood at 22.3 Note: UGS: Ugandan Shilling, TZS: Tanzanian Shilling, BIF: percent in December 2010 against 21.0 Burundian Franc and KES: Kenyan Shilling. Source: BNR percent in December 2009, the minimum 2.6. MONETARY POLICY AND CREDIT required is 15.0 percent. The ratio of non- TRENDS performing loans in total loans declined from 13.1 percent in December 2009 to In 2010, monetary policy has been 11.3 percent in December 2010. The overall accommodative, but credit growth banking sector liquidity position has also remained lower than expected. The policy improved. As of December 2010, there was rate (key repo rate) of the Central Bank was a 17.0 percent increase in money supply, cut three times by a cumulative 300 basis 17.4 percent increase in bank deposits and points from 9.0 percent in November 2009 the loan-to-deposit ratio decreased to 75.6 to 6.0 percent in November 2010. The down from 79.9 percent of December 2009. policy rate was maintained at low level with the aim of releasing more liquidity into the Despite the cut of the key repo rate, banks banking system by keeping costs of funds at also continued to increase their activities low level, thus making credit to the in the money market As of December 2010, 22 | P a g e commercial banks held 88.3 percent of In 2010, newly authorized loans reported a treasury bills stock. Additionally, stock of 64.2 percent increase to Rwf262.6 billion domestic securities have been rapidly up from Rwf198.4 billion in 2009. In terms growing from Rwf74.2 billion in December of distribution by sectors of economic 2009 to Rwf135.3 billion by end December activity, the main share of newly authorized 2010, reflecting a 182.3 percent increase in loans was absorbed by: trade, restaurants & only one year. The stock has been recording hotels (42.6 percent), construction (17.2 peaks at the end of quarters, especially percent), manufacturing and transport from the second quarter of 2010. This was (10.2 percent), warehousing & mainly due to the fact that the Government communication (8.6 percent). Newly had to issue treasury bills to meet quarterly authorized loans to the agriculture sector priority spending targets. Government remained low accounting for only 2.1 interventions pushed the reserve money, percent of the total new loans. the anchor of monetary policy, beyond its target. Central Bank had to carry out Credit to the private sector picked up less mopping up operations, using repo than expected. As of end-December 2010, operations and issuance of treasury bills, annual growth in credit to the private sector thus stock of domestic debt securities also stood at 11.4 percent, against the projected peaked on a quarterly basis (Figure 18).16 growth of 20.0 percent. High levels of banks’ lending rates, the extensive issuance Figure 18. Money Market Operations (Billion of Rwf) of treasury bills to finance the 140.0 1 to 14 days 15 to 28 days 91 days Government’s budget, combined with the 182 days 364 days Banks 120.0 fact that most of the banks were 100.0 strengthening the recovery process and writing off bad loans, slowed down the 80.0 credit growth. 60.0 40.0 20.0 0.0 Source: BNR 16 Treasury bills are also used to sterilize the liquidity. 23 | P a g e DATA SOURCES AND REFERENCES BNR. 2010 Quarterly Bulletins. BNR. (2010). Annual report 2009. BNR. (February 2011). Monetary Policy and Financial Stability Statement. BNR. Website. Boudreaux, K. A Better Brew for Success - Economic Liberalization in Rwanda Coffee Sector. forthcoming. IFDC. (March 2010). Crop Intensfiication Program (2009-2009)- Evaluation Report. IMF. (2010). Rwanda: Staff Report for the 2010 Article IV Consultation, First Review under the Policy Support Instrument, and Modification of Assessment Criteria. Washington. IPAR. (2009). Rwandan Agriculture Sector Situational analysis. Kigali. J. E. Austin Associates, Inc. (2009). Study on Marketing, Post Harvest, and Trade Opportunities for Fruit and Vegetables in Rwanda. MINAGRI & MINICOM. (December 2008). Rwanda National Coffee strategy 2009-2012. Kigali. MINAGRI. (2011). Crop Production database. MINAGRI. Website. Ministry of Finance and Economic Planning. Website. Murekezi, A., & Loveridge, S. (2009). Have coffee reforms and coffee supply chains affected farmers' income? The case of coffee growers in Rwanda. Michigan. NISR. Labor market and economic activity trends in Rwanda. NISR. (2010). National Agriculture Survey 2008. NISR. Website. OCIR CAFE. (2010). The census. RDB. (2011). Highlights of Tourist Arrivals in Rwanda - 2010. RDB. (October 2010). Opportunities for Investors in Rwanda's Tea sector. Republic of Rwanda. (2007). Economic Development & Poverty Reduction Strategy 2008-2012. Kigali. Republic of Rwanda. (2010). Strategic Investments to Promote Exports and Services in Rwanda. Kigali. Republic of Rwanda. (2009). Strategic Plan for the Transformation of Agriculture in Rwanda-Phase II. Kigali. Republic of Rwanda. (2000). Vision 2020. Kigali. RHODA. Website. RURA. (n.d.). Website, ICT statistics. Retrieved January 25, 2010, from http://www.rura.gov.rw/index.php?option=com_content&view=article&id=278 Rutamu. (2008). Investment Opportunities in the Dairy sub-sector of Rwanda. USAID. (2006). Assessing USAID's Investments in Rwanda's Coffee Sector. World Bank. (2007). Promoting Pro Poor Agricultural Growth in Rwanda: Challenges and Opportunities. World Food Program . (2009). Rwanda Comprehensive Food Security and Vulnerability Analysis (CFSVA). World Food Program. (2006). Rwanda Comprehensive Food Security and Vulnerability Analysis (CFSVA). 24 | P a g e ANNEX 1: GROWTH TRENDS IN FOODS CROPS (2004-2010) In 2010, cereals occupied 25.0 percent of all area planted with food crops. Production of cereals has increased at a rate of 15.3 percent per year from 2004 to 2010. Growth was more pronounced from 2007 to 2010, when production grew at 27.6 percent per year, stimulated by the extension in cultivated area as well as an increase in yields. The overall growth rate and the relative contribution of these two sources varied between crops. Production of maize increased very rapidly, fueled mainly by the use of improved seeds. Production of wheat increased, mainly due to the extension in the area planted and the use of improved seeds. Production of rice showed modest growth, following a decrease in cultivated area. Production of sorghum decreased subsequent to a decline in productivity. Table 10: Compound Growth in Food crops (Percent) 2004-2007 2007-2010 2004-2010 Area Yield Production Area Yield Production Area Yield Production Cereals 2.6 4.1 9.9 27.6 6.2 15.3 Sorghum -3.3 3.1 0.6 9.4 -15.5 -1.1 2.9 -6.7 -0.3 Maize 9.7 -1.7 5.1 9.4 44.9 61.6 9.5 19.4 30.3 Wheat 7.4 5.5 13.7 21.5 24.1 46.3 14.3 14.5 29.0 Rice 7.2 3.2 10.1 -4.7 7.2 2.9 1.1 5.2 6.5 Roots and tubers -1.0 -3.5 3.3 24.0 1.1 9.4 Irish Potato -2.2 -0.6 -3.4 6.6 9.0 22.8 2.1 4.1 8.9 Sweet Potato -3.3 0.2 -2.4 -8.7 9.9 -0.2 -6.0 4.9 -1.3 Yam & Taro 1.7 -1.4 0.2 0.4 10.3 10.7 1.1 4.3 5.3 Cassava 2.2 -7.4 -5.2 11.4 30.2 45.2 6.7 9.8 17.3 Banana -0.9 3.9 3.0 -1.9 2.6 0.6 -1.4 3.2 1.8 Pulses 4.5 18.0 -0.4 2.9 2.0 10.2 Beans 3.9 15.2 18.7 -3.8 3.6 -0.4 0.0 9.3 8.7 Peas 4.6 2.1 5.5 9.0 14.7 24.6 6.8 8.2 14.6 Groundnuts 1.0 -3.7 -2.8 1.8 11.2 13.2 1.4 3.4 4.9 Soya 11.0 16.0 29.7 12.9 1.1 12.8 12.0 8.3 20.9 Vegetables & fruits 1.5 9.2 2.9 4.2 2.2 6.7 Vegetables 1.0 -2.0 -0.8 1.3 0.7 2.1 1.1 -0.7 0.6 Fruits 2.3 -1.7 36.4 5.2 1.9 7.1 3.8 0.1 20.9 Total 1.3 1.6 2.7 12.7 2.0 7.0 Source: Ministry of Agriculture Pulses occupy just over 19 percent of all area planted to food crops in Rwanda. Production of pulses has increased by 10.2 percent since 2004 to 2010. However, production of pulses grew only modestly between 2007 and 2010 due to overall contraction in the area planted with pulses. This weaker performance of pulses raises concerns because it comprises a food staple for the majority of rural households and hence is a key food security crop. In 2010, roots and tubers occupied 26.7 percent of all area planted with food crops. Significant growth was recorded in production of roots and tubers with an average annual growth of 9.4 percent over the period 2004-2010. Within the category and over the period, growth rates varied: Production of cassava declined between 2004 and 2007, mainly due to the Cassava Mosaic Disease (CMD). After the introduction of new cassava trees that are resistant to the CMD in 2008, and, benefiting from the expansion of area, production of cassava averaged an annual increase of 45.2 percent between 2007 and 2010. 25 | P a g e Production of Irish potato fell between 2004 and 2007 due to unfavorable weather, combined with a decrease in cultivated area. From 2007 to 2010, production of Irish potato registered a 22.8 percent increase per year fueled by a 16.3 percent in use of improved seeds and use of fertilizer. Production of sweet potato fell, following a decline in planted land. Producers shifted more profitable land out of sweet potato cultivation. Sweet potatoes were traditionally planted in many of the marshlands that have recently been developed for irrigation and are now being planted to rice and other high-value crops. Between 2004 and 2010, the area planted with fruits and vegetables has expanded at a rate of 2.7 percent per year and occupied more than 5.0 percent of Rwanda’s area planted with food crops. Production of vegetables and fruits saw a 6.7 percent increase between 2004 and 2010, fueled by an expansion in area as yields were not performing well. The area planted with banana remains significant as it represents about 19.0 percent of Rwanda’s area planted with food crops. From 2004 to 2010, production of banana reported a modest increase of 1.8 percent per year, mainly driven by a growth in yields as the area planted was contracting. 26 | P a g e ANNEX 2. GROSS DOMESTIC PRODUCT BY ACTIVITY AT CONSTANT 2006 PRICES (RWF BILLION) 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Gross Domestic Product 997.1 1,080.7 1,175.4 1,333.9 1,353.9 1,449.8 1,580.8 1,716.4 1,848.8 2,062.3 2,187.1 2,351.1 Agriculture 443.7 477.0 519.1 606.5 589.1 601.6 640.5 659.7 677.3 720.7 776.2 814.5 Food crops 373.4 401.8 437.5 519.4 500.3 498.5 537.9 545.5 567.5 602.9 659.5 691.9 Export crops 13.1 15.2 17.2 18.2 15.2 24.6 19.1 25.3 18.0 23.2 19.7 22.5 Livestock 22.3 23.4 24.9 26.0 27.2 28.3 29.6 30.9 32.3 33.4 34.2 35.6 Forestry 30.2 31.7 34.2 37.5 40.9 44.4 48.1 52.0 53.4 54.9 56.4 57.9 Fisheries 4.8 4.9 5.3 5.4 5.6 5.7 5.9 6.0 6.2 6.3 6.5 6.7 0.0 0.0 0.0 0.0 Industry 128.5 130.9 149.9 158.8 166.2 193.6 212.1 236.2 257.8 296.7 300.8 326.0 Mining 2.8 4.0 10.8 8.2 6.5 9.7 12.7 11.0 15.6 13.2 10.8 9.7 Manufacturing 60.6 60.9 67.9 77.9 82.2 94.2 102.6 116.7 117.6 124.2 127.9 139.7 Of which: Food 17.1 18.0 22.5 24.8 27.6 37.5 42.1 48.9 46.7 50.3 53.4 58.4 Beverages and tobacco 22.9 21.1 21.3 25.5 23.1 23.6 26.3 28.2 27.8 28.6 29.9 30.5 Textiles and clothing 3.5 4.1 4.3 5.0 5.5 6.5 7.1 8.2 8.9 8.8 8.6 8.8 Wood, paper and printing 1.6 1.7 1.8 2.4 3.2 3.6 4.9 6.0 7.1 7.6 8.2 8.7 Chemicals, rubber, plastics 3.6 3.6 3.8 4.5 5.3 5.8 6.3 7.5 7.5 7.8 7.8 8.2 Non metallic minerals 5.7 6.0 7.5 8.9 9.6 9.9 9.9 10.6 10.7 11.3 10.7 11.8 Furniture and other 6.1 6.3 6.7 6.9 7.8 7.3 6.0 7.3 8.8 9.8 9.3 13.4 Electricity and water 9.0 8.0 7.2 7.1 6.5 4.4 3.9 3.4 3.5 4.2 4.8 5.5 Construction 56.0 58.1 64.0 65.6 71.0 85.2 92.9 105.1 120.9 155.1 157.3 171.1 0.0 0.0 0.0 Services 361.0 403.6 431.0 482.0 514.2 567.8 635.3 720.2 808.9 927.5 981.7 1,075.6 Real estate, business services 83.0 85.7 88.5 92.7 97.7 100.4 108.5 113.2 126.0 146.2 158.9 161.2 Other personal services 1.4 7.3 7.7 9.7 12.4 14.4 19.3 23.0 26.3 26.8 25.4 27.2 Hotels and restaurants 8.1 8.3 8.7 12.6 19.0 24.0 32.8 40.3 41.6 43.9 41.4 44.7 Wholesale and retail trade 91.7 103.6 110.3 125.5 127.7 143.7 162.8 192.5 220.9 263.7 274.3 297.2 Transport, storage, communication 41.6 48.2 55.1 64.8 68.8 81.4 95.1 116.6 134.1 166.0 181.3 197.0 Public administration 65.8 69.5 72.2 72.5 76.8 77.3 79.3 86.6 91.8 96.3 103.3 116.9 Education 28.9 34.2 38.3 53.4 50.7 60.4 71.4 76.1 87.3 99.5 110.0 126.3 Health 13.3 13.6 15.4 16.8 20.2 21.9 21.1 22.8 26.1 29.2 33.6 38.9 Finance, insurance 27.2 33.3 34.8 34.0 40.9 44.3 44.9 49.1 54.9 55.8 53.5 66.1 Adjustments 63.9 69.2 75.3 86.6 84.4 86.8 92.9 100.3 104.9 117.4 128.4 135.0 Less: Imputed bank service charge -15.9 -17.2 -18.4 -16.6 -18.2 -20.4 -21.0 -23.6 -28.6 -31.5 -29.5 -34.8 Plus: VAT and other taxes on products 79.7 86.4 93.7 103.2 102.6 107.2 114.0 123.9 133.5 148.9 157.9 169.7 Source: NISR 27 | P a g e ANNEX 3. GOVERNMENT PRIORITY AREAS OF SPENDING 1. The development of physical infrastructure: Priorities will be those investments that improve the business environment and reduce the cost of doing business in Rwanda, such as energy generation and distribution, road construction and rehabilitation, and ICT development. 2. Productive sector: Spending will focus on agriculture supply, agri-business, land reform and promotion of value addition for exports. Special emphasis will be put on accelerated implementation of the pro-poor Vision 2020 Umurenge Program (VUP), introducing integrated development projects in all provinces and promoting non-traditional export crops. 3. Human development and social protection: The focus is on interventions to improve the quality of life of the population with special emphasis on providing 9-year basic education, skills development through vocational training colleges and strategic support to higher education. Efforts will be also directed towards improving the health of the people by intensifying the fight against infectious diseases, preventing and treating non- communicable diseases, reducing maternal, infant and child mortality and provide family planning services. Social protection interventions will be mainly geared towards increasing the productive capacities of the vulnerable members of society by providing employment income generating projects, while giving direct support to the physically handicapped and aged people. 4. Good governance and protection of state sovereignty: The priority will be to strengthen community policing and to promote the community program of human rights and judiciary support, with particular attention to supporting institutions that promote integrity and the fight against corruption, especially the Ombudsman and the Office of the Auditor General. Fiscal decentralization will be enhanced through increased fiscal transfers to local government and fiscal reforms undertaken to mitigate any fiduciary risks in local governments’ financial management. Support will also be given to Peace Keeping Forces (in Sudan and the East African Community standby force) to ensure security of the state. 28 | P a g e The World Bank, Rwanda Blvd. de la Revolution SORAS Building P.O. Box 609 Kigali, Rwanda Telephone: +250 252 591 300 Fax: +250 252 576385