The World Bank projects Rwanda’s economy to grow 7.2 percent between 2024 and 2026, driven by global tourism, new construction projects, and increased manufacturing activities.
A report by the bank shows that “fiscal consolidation will continue, focusing on reducing subsidies, overseeing state-owned enterprises, and introducing tax policy measures to broaden the revenue base.”
The report indicates that Rwanda’s economy grew at 7.6 percent in the first three-quarters of 2023 despite a challenging global environment and recent floods.
According to the bank, services sector, sustained domestic demand, and the rebound of the industrial sector, contributed to the growth.
“Rwanda successfully balanced inflation control, managed external deficits, and ensured fiscal prudence, showcasing a resilient financial sector, despite widening external deficits and the depreciation of the Rwandan franc,” the report says.
“The World Bank encourages the country to pursue its prudent fiscal management by reducing non-essential spending and prioritising investment in human capital,” said Peace Aimee Niyibizi, World Bank country economist for Rwanda.
This outlook is, however, subject to significant risks, including disruptions to the global economy, trade, and lower availability of concessional resources.
Experts have also noted that frequent weather-related shocks could result in a decrease in food production, and higher food prices, negatively impacting poor households.
Western and southern Rwanda, as well as Kigali City are expected to experience rains ranging between 700 millimetres and 800 millimetres, a range last experienced in 2016.
The National Bank of Rwanda has maintained its lending rate at 7.5 percent, keeping withthe inflation projections and risks identified.
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The central bank has said inflation is projected to remain within the band of 2-8 percent, averaging close to five percent. Annual inflation peaked at 21.7 percent in November 2022.
“We might start reducing the policy rate in the next MPC (Monetary Policy Committee) rounds depending on how these economic variables behave,” central bank Governor John Rwangombwa told a news conference. “So far, what we project is positive, and if it continues like this then we might start reducing the policy rate.”
Mr Rwangombwa, however, said that several risks could affect this outlook, including geopolitical tensions such as the war in Ukraine and the disruptions in the Red Sea that may influence international commodity prices, and weather-related challenges that could affect agriculture sector performance.
To address Rwanda’s lack of savings, the World Bank suggested implementation of subsidies, incentives, and educational programmes promoting the benefits of savings.
Encouraging customer-centric product development, leveraging digital financial literacy programmes, and engaging the Rwandan diaspora are other key interventions suggested for effective savings mobilisation.
