Rwanda: Presidential election provides no surprise, economic reform programme expected to continue

Posted by on Sep 19th, 2017 and filed under Allgemein, Breaking News, Markets. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

Event

 

This month, Paul Kagame was re-elected as president of Rwanda. He has been de facto in power since the end of the genocide in 1994.

 

While Kagame has been responsible for significantly transforming the Rwandese economy, he has been criticised by US and EU human rights groups for silencing virtually all politicalopposition to his rule.

 

His current bid for the presidency was only possible after the constitution was amended in December 2015 which made it possible for him to run a third time for re-election.

 

 

Impact on country risk

 

The re-election of Kagame does not come as a surprise since the amendments to change the constitution where approved in a referendum by 98% of the votes. In the last 15 years the economy has undergone a significant transition.

 

The country has been growing by almost 8% on average, poverty has been strongly reduced and the business environment has improved significantly. But at the same time the economy continues to face a number of challenges.

 

Indeed, external imbalances are large. While the current account deficit was around 7% of GDP in 2011, it rose to around 14% of GDP in 2016. This increase was mainly due to an increase in good imports and a reduction in development aid on which the country depends heavily. The reelection of Kagame means that the current economic policy will continue.

 

Currently, the government is trying to address external imbalances and become less reliant on aid. The increased exchange rate flexibility has led to an appreciation of the currency and thereby a slight reduction of imports in 2017. At the same time the government is implementing a ‘made in Rwanda’ programme in which they try to replace the imports of goods in 4 specific sectors by local products.

 

The government has also tried to attract more tourism and become a conference destination in East Africa. This is done via large investments in RwandAir and the Kigali Convention Center. But while these investments still have to pay off, they already led to an increase in public debt. While public debt was around 22% of GDP in 2013, it was at 45% in 2016.

 

Nevertheless, this remains a sustainable level. Additionally, the country has been trying hard to attract more FDI. While FDI as a share of GDP has increased the inflows of investments into the landlocked country, they remain relatively small and not sufficient to fund the large current account deficit. This is leading to a build-up of external debt.

 

Nevertheless, both the MLT and ST political risk outlook remain stable in category 6 and 4 respectively.

 

Jan-Pieter Laleman – Credendo

 

Disclaimer: Credendo has used its best endeavours to ensure that all the information, data, documentation and other material (copy and images) in this report are accurate and complete. Credendo accepts no liability for errors or omissions. The views expressed herein are the author’s personal views and are not intended to reflect the views of Credendo. Credendo will not be liable for claims or losses of any nature arising directly or indirectly from use of the information, data, documentation or other material from this report.

 


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