Jan 27, 2022

Mawazo Writing Africa

Writing about the main

Unemployment and poverty threaten Rwanda growth, says IMF

Rwanda’s economy is recovering and growing fast, but problems such as rising unemployment and poverty loom.

This year, the country’s economy is expected to grow by 7.0%, slightly below the expected 10.2 %, according to the latest International Monetary Fund (IMF) figures released last week.

The projected rate is still well above the original forecast of 5.1 percent, signaling a strong recovery as Key sectors of the economy to reopen in 2020 after a 3.4 percent contraction.

The government now faces the twin challenges of containing the rise in unemployment and poverty caused by the pandemic.

< The World Bank estimates that due to the lockdown, social distancing rules and increased costs associated with the pandemic, the number of poor is expected to increase by 5.1 percentage points (more than 550,000 people) in 2021, wob ith more than 80 percent of the new poor live in rural areas.

Despite the government acting quickly to cushion the shocks, Inc. In addition to establishing a multimillion-dollar Special Economic Recovery Fund and expanding its social protection programs, analysts say that more interventions are needed to get more Rwandans back to work.

Risk remains

According to Bo Li, deputy chief executive and acting chairman of the IMF, the Covid 19 pandemic is increasing unemployment and poverty in Rwanda, threatening hard-won gains to be undone.

“A strong economic recovery is underway as vaccinations accelerate and economic activity resumes , although the risks remain to the downside given the still low vaccination rate and the prospect of repeated Covid-19 waves,” he said in a statement ng.

Rwanda succeeds The vaccination campaign has allowed it to reopen key sectors of the economy, including service sectors. Conference tourism and hospitality, which employ a majority of Rwandans, have been hit hard during the pandemic.

The recovery is also being helped by regional trade, particularly with the Democratic Republic of the Congo.

However, analysts are cautiously optimistic. They expect the economy to rebound strongly in 2022 but say new Covid restrictions introduced at the end of the year pose a risk.

“I suspect that one of the main drivers of the Growth in 2022 will be a revival of the tourism and MICE industry. Rwanda stands out in the region for having a high proportion of the vaccinated population, particularly in the capital Kigali, and this is expected to give Rwanda a head start when it comes to welcoming back visitors from the region both in in the region as well as globally,” said Andrew Mold, Chief, Regional Integration and AfCFTA Cluster, United Nations Economic Commission for Africa.

The past year has been tough for executives as revenues shrank due to the negative impact of the ongoing pandemic.

Businesses optimistic

As the government accelerates vaccine deployment, business leaders say the worst of the virus may be over. They expect the government to keep the economy open despite the emergence of new variants.

“We have the liquidity, so we will expand our loan book this year and look into financing sectors such as mining, agriculture and traditional exports, that are developing well during this time,” said Hannington Namara, CEO of Equity Bank Rwanda.

But despite the positive outlook, there are headwinds. New waves of infection and new variants of the virus are creating uncertainty and continue to undermine confidence and could lead to higher fiscal and external financing needs, according to the IMF.

The recent sharp rise in public debt – estimated at 70 percent of GDP in 2021 up from 55 percent in 2019 – limits government funding options.

IMF says additional budgetary spending on urgent social needs and to support recovery is expected in FY21/22.

< p>Rwanda has been allocated US$219 million under the IMF’s Special Drawing Rights, which is expected to ease liquidity pressures and help stabilize national reserves.

However, analysts at Fitch Ratings say the ongoing impact of the The pandemic will delay any improvement in Rwanda’s public finances.

“We forecast that the state-level D The deficit for the fiscal year ending June 2022 (FYE22) will decrease to 8.6 percent of GDP, which is below the 9.2 percent estimated for FYE21 but much higher than the current ‘B’ median for ecast of 5.3 percent .”