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Our 2020 Milestones

from KCB BANK RWANDA INTEGRATED REPORT

by Yakub Ibrahim

from KCB BANK RWANDA INTEGRATED REPORT, page 22

Article from: KCB BANK RWANDA INTEGRATED REPORT

Board of Directors Profiles

Operating Environment

RWANDA

Rwanda’s economy shrunk 3.6% year-onyear in the third quarter of 2020 following a record 12.4% contraction in the previous period as activities gradually recovered from the COVID-19 pandemic shock. The services sector shrunk 7.0% driven by a 55.0% and 12.0% contraction in hotels & restaurants and trade & transport respectively. However, information & communication, manufacturing and agricultural activities grew by 43.0%, 6.0% and 2.0% respectively. The IMF projects a full year contraction of 0.2% in 2020 and a rebound to 5.7% in 2021 driven by improvements in the business environment and investment in major growth sectors.

Rwanda’s annual inflation rate eased for the fifth straight month to 3.9% in December 2020. The inflation rates remained above 10% from January to September hitting a high of 13.5% in March 2020. Mild pressures on core inflation are expected over the medium term as a result of the continuous real exchange rate depreciation but the headline inflation is projected to drop to 1.3% in 2021. The exchange rate depreciated by 5.4% in the year with the Rwandan Franc (FRW) exchanging at 972 to the US Dollar but reserves remained adequate at 5.8 months of import cover.

Rwanda was the first country in the region to enforce a total lockdown at the onset of the pandemic, leading to a slow growth in the number of infections and deaths in the country. Furthermore, the government initiated a raft of containment measures including enforcing social distancing, mandatory wearing of face masks and provision of medical support. On the monetary front, the National Bank of Rwanda reduced the Central Bank Rate (CBR) to 4.5%; lowered the reserve requirement ratio by 100 basis points to 4.0%; extended a lending facility worth RWF 50 billion that banks facing liquidity challenges could borrow from; allowed banks to restructure loans for impacted borrowers and introduced waivers for mobile money transactions. Branches 13 ATMs 26 Agents 480 Merchant outlets 157 Staff 244

The Government of Rwanda further scaled up emergency health spending and support to vulnerable households in the form of regular in-kind transfers of basic foodstuffs; introduced tax relief measures including the suspension of down payments on outstanding tax for amicable settlement; softened the enforcement for tax arrears collection; extended the deadline for filing and paying corporation income tax; and fast tracked VAT refunds to SMEs.

The Economic Recovery Fund (ERF) was also established by the government to support the recovery of businesses hardest hit by the pandemic resume operations and safeguard jobs. The fund estimated at US$ 900 million over the two fiscal years 2019/20 and 2020/21, aims to scale up social safety net programs for the most vulnerable, build key infrastructures, and support strategic enterprises, including small- and medium-size enterprises.

Rwanda’s growth, coupled with a focus on the business environment, is expected to stimulate growth in private investment. Currently, foreign direct investment averages 3.0% of GDP and is expected to gradually increase as the country improves the ease of doing business. The 2020 World Bank Doing Business report ranks Rwanda second in Africa. The country is scheduled to host the Commonwealth Heads of Government Meeting (CHOGM) in 2021. The event was postponed from 2020 due to the pandemic. This meeting offers an opportunity for the country to showcase her investment opportunities.