Rwanda President Sees Growth Accelerating on Banking, Mining

(Bloomberg) -- Rwandan economic growth is expected to accelerate this year and next as the outlook for industries including financial services, tourism and mining improves, President Paul Kagame said.

The pace of expansion is expected to increase to 7 percent next year from about 6 percent this year, Kagame said Thursday in an interview in Dubai. That compares with 2016’s growth rate of 5.9 percent, which was a three-year low. Output already increased in the second and third quarters after slowing last year when infrastructure projects were completed, he said.

“The driving sectors are services,” Kagame said. “Financial services, tourism, they are all combined to make this high growth. We are seeing mining activity growing very fast. We are seeing agriculture making a very good contribution, construction has picked up again.”

Rwanda’s economy has expanded an average of more than 7 percent a year since Kagame took office in 2000. The 60-year-old leader’s rule of the East African nation was extended in August, after a 2015 referendum backed amending the constitution to remove a two-term limit. While he’s been credited with turning Rwanda into one of Africa’s top performers by cutting red tape and improving infrastructure, detractors including Amnesty International say that’s been at the expense of a crackdown on civil liberties

IMF Estimate

The International Monetary Fund estimates growth in Rwanda will reach 7.5 percent by 2022, compared with a forecast 6.8 percent in 2018. Expansion this year could be revised downward by a percentage point to 5.2 percent, Mission Chief Laure Redifer told reporters in capital, Kigali, on Wednesday.

Growth is also being supported by stronger domestic demand and improved prices for metals the country produces including tantalum, tin, tungsten and gold, Kagame said.

“We have seen low demand for these commodities, but we see commodities are picking up again,” Kagame said. “But what is powering and driving growth is mainly the domestic demand.”

Rwanda has no immediate plans to tap international capital markets, Kagame said. It last raised $400 million in a Eurobond offering in 2013. A five-year Treasury bond for 10 billion francs ($11.7 million) on its local market was more than two times oversubscribed in August and had a 12.2 percent yield. The next issue will be a seven-year bond on Nov. 22.

There is “nothing on our minds right now because there isn’t as much compelling need as we had that time,” he said.

Moody’s Investors Services rates Rwanda’s debt at B2, five levels below investment grade and cites the country’s “robust institutional framework” as an important credit strength. Economic growth is being buttressed by infrastructure projects including the construction of the $700 million Bugesera international airport in southern Rwanda.

One of the risks the economy faces is its dependence on donor funding for about a fifth of government revenue, according to Moody’s. The government is planning to reduce that reliance, which has already been lowered from more than 70 percent, Kagame said.

“We want to continue to reduce that as we continue to grow our economy,” he said.

--With assistance from Toni Parsons

To contact the reporter on this story: Zainab Fattah in Dubai at zfattah@bloomberg.net.

To contact the editors responsible for this story: Alaa Shahine at asalha@bloomberg.net, Paul Richardson, Rene Vollgraaff

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