Rwanda’s economy has faced strong headwinds over the past 18 months. The mining industry, a key contributor of hard currency revenues, suffered twin shocks last year in the form of falling commodity prices and declining production. This in turn sparked a slump in foreign exchange reserves as well as a spike in the current account deficit to 16.5%.
For a small country with limited export opportunities this could have proved a severe setback. The impact on the wider economy, however, has been largely mitigated by prompt action by policymakers. In June, Rwanda secured a $204m standby credit facility from the International Monetary Fund in return for commitments to tighten fiscal and monetary policy. These include a phased reduction in the budget deficit to 3.3% of GDP for the fiscal year ending in June 2018, primarily via cuts to capital expenditure, as well as an array of initiatives to boost domestic revenues.
Rwanda’s minister of finance and economic planning has been a key mover in this process. An economist by training, Claver Gatete began his political career in the office of president Paul Kagame in 2001. After an initial stint at the finance ministry, he served terms as Rwanda’s ambassador to the UK, Ireland and Iceland before joining the central bank in 2009 as deputy governor. He was promoted to governor two years later and then tapped to head up the finance and economic planning ministry in February 2013.
In this role, Gatete has demonstrated an impressive commitment to prudent and proactive fiscal management as well as a talent for crafting agreements with international institutions. In addition to the IMF deal, notable achievements this year have included securing $162m of funding from the African Development Bank and the Japan International Cooperation Agency for two major highway upgrades as well as smaller loans for water and sanitation projects. Gatete also announced plans in May to develop a rail link to Tanzania and the Indian Ocean, seen as a crucial step in addressing Rwanda’s weak export base.
Confidence in his ability to deliver on these commitments is reflected in buoyant growth forecasts for Rwanda. After a small dip to 6.3% this year, the IMF predicts GDP expansion to increase next year and remain on an upward trajectory for the rest of the decade, reaching 7.5% by 2020. That will make Rwanda one of the fastest growing economies in both sub-Saharan Africa and the broader emerging markets universe.
Moody’s notes that the positive outlook for Rwanda is anchored by a high competitiveness rating and an open business environment. “Rwanda is among the strongest performers with respect to institutional strength in sub-Saharan Africa as measured by worldwide governance indicators, with a positive track record of policy implementation and reforms,” analysts said in a recent ratings report.