Factors Limiting Trade Development in Rwanda

Manzi Rutayisire, Antoine (2021) Factors Limiting Trade Development in Rwanda. International Journal of Trend in Scientific Research and Development, 6 (1). pp. 1824-1830. ISSN 2456-6470

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Abstract

Trade performances in Rwanda envisages an effective response to new opportunities, challenges and commitments arising from increased domestic production, regional economic integration and paradigm shifts in international trade and investment. It has to build on the gains and experiences from the past experiences as well as sector and cluster specific strategies. Over the past ten years Rwanda’s trade performance has achieved phenomenal growth. Exports increased as a percentage of total trade from 28% in 2010 to 38% in 2019, increasing in value from $382 million to $2.1 billion for both goods and services1. Importation of consumer, capital, and intermediary goods as well as petroleum products also increased remarkably between 2010-2019 by 116% to account for nearly $2.6 billion in value. The services sector, which accounted for 49% of GDP in 2019, contributed $1 billion in total services trade in 2019. Rwanda need to build on these gains and provide the strategic vision of Rwanda’s future trade development, while borrowing from the lessons learned. The key lessons gleaned are: A. Improvements in foreign trade by value and volume as well diversification of products and markets. The changes were driven by improvements in the policy environment; expansion of industrial and services sectors; domestic recapturing and export promotion. B. Trade deficits persisted even though total exports as a percentage of Gross Domestic Product (GDP) expanded from 11% in 2010 to 22% in 2019. C. Services trade has improved and diversified, with tourism, travel, financial and ICT services contributing to a narrowing of the services trade balance, while informal cross border trade has remained consistently important in volume, value, and diversification of products. D. New markets emerged, as China, India and the United Arab Emirates displaced Switzerland, Belgium, and Uganda as Rwanda’s key trading partners. The East African Community and emerging regional blocs like SADC and COMESA are vital for preferential market access. Consequently, our research responds to these opportunities and challenges by streamlining and expanding on the previous experience. The researcher is cognizant of the contraction and disruption in global trade caused by the uncertainties to trade which is leading to the idea of identifying factors limiting Rwanda Trade development. Among the chief targets are attaining upper middle income country status by 2035, and high-income status by 2050. In economic terms, Rwanda should achieve a GDP per Capita of $4,036 by 2035, and $12,476 in 2050. Under the NST1 priority 4 target, exports are set to increase annually by 17%, contributing significantly to the role of trade in the country’s developmental goals. As a result, trade targets should be aligned to Vision2050 and NST1 goals, ensuring that trade of merchandise goods and services supports this achievement, stimulating industrialization, diversification of export products and services, integration into regional and global value chains, and expanding economic opportunities. For this to happens, challenges impeding trade development need to be identified and addressed.

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