Rwanda will see economic growth of 7.5 percent this year and more than 8 percent next year, helped by strong exports and the restoration of aid, the country's finance minister said on Tuesday. The 7.5 percent growth target for this year remains achievable, Claver Gatete told Reuters in an interview on the sidelines of an emerging markets conference, even though the International Monetary Fund last week cut its growth forecast for the East African country to 6.6 percent.
"We believe that, with some structural changes that we are putting in place, that the 7.5 percent is still achievable," Gatete said. "For the following year we will return to the normal pace of growth, which is above 8 percent." Rwanda's economic growth rate averaged 8.2 percent between 2006 and 2012.
Exports increased by 46 percent in the first half, driven by strong export growth in minerals and coffee and tea, Gatete said. Planned reforms included improvements in financial services and capital markets, and in export sectors such as agriculture, Gatete said. Further reforms, including developing public-private infrastructure partnerships, will enable Rwanda to reach its targeted annual growth of 11.5 percent by 2020, he added.
Bilateral and multilateral lenders have fully restored their aid to Rwanda after cutting it last year, Gatete said, and are supporting various sectors of the budget. Almost 40 percent of the 2013/2014 budget is expected to be provided by international aid, Gatete added. International donors suspended aid over allegations by UN experts and the Congolese government of Rwandan backing for rebels in the neighbouring Democratic Republic of Congo. Kigali denies supporting the rebels.
Rwanda launched a $400 million international bond in April at the height of demand for high-yielding bonds. The bond saw subscriptions of more than 8 times the issue size but has since fallen sharply in value. This was not related to problems in Rwanda's economy, Gatete said, but to concern about the US Federal Reserve's anticipated withdrawal of monetary stimulus. "Quantitative easing and the measures taken by the United States, that is what is really driving investors," he said.
Rwanda has no immediate plans to launch more international debt, but will do so when it needs to finance specific projects, Gatete said. The country was developing its capital markets, Gatete added, with plans to extend its domestic yield curve. "We have a 5-year bond, within a few months we are going to be in 7 and 10-year." The World Bank's private sector arm, the IFC, also plans to launch a 10-year bond denominated in Rwandan francs, Gatete said. The Rwandan franc has fallen sharply in recent months, hitting record lows beyond 660 per dollar, which Gatete said was due to higher levels of foreign direct investment, which has increased the need for foreign goods.
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