Rwanda has unveiled an additional Rwf350 billion ($350 million) stimulus plan for its economy to support businesses hard hit by the pandemic, boost jobs and reduce poverty.
Rwandan experts have said that Rwanda needs financial support such as grants and soft loans to support its economic transformation, a priority in the government’s 7-year National Strategy for Transformation, in the aftermath of the COVID-19 pandemic.
Rwandan economy like other economies in the world have been greatly affected by the COVID-19 pandemic as several economic activities came to standstill, most especially during lockdowns imposed to contain further spread of the virus, and sectors like tourism, transport, manufacturing, services and retail trade in the central African nation were disrupted by the pandemic.
Growth of trade in goods and services declined due to restrictions in cross-border movements, with travel restrictions, suspension of air travel and hotels operation.
The GDP in real terms fell by 3.6 per cent (year-on-year) in the third quarter of 2020, following a 12.4 per cent contraction in the second quarter, signalling the country’s anaemic recovery.
In 2020, the National Bank of Rwanda put in place Rwf50 billion stimulus package to increase the liquidity of commercial banks in order to sustain lending to the private sector.
The central bank also directed commercial banks to ease loan repayment conditions to borrowers whose income streams have been affected by the global COVID-19 pandemic.
The funding, under the Economic Recovery Fund (ERF), was initially set up in June 2020 with an allocation of approximately Rwf100 billion ($100 million) for two years, targeting tourism and hospitality, manufacturing, transport and logistics as well as small and medium enterprises linked to domestic and global supply chains.
While the latest source of the funding has not been made public, Covid-19 related spending, health and economic measures have cost the government more than $311 million or 3.3 percent of the GDP as of September 2020, according to the International Monetary Fund.
The additional funding relief will also support construction.
The education sector has been added after the prolonged shutdown of learning institutions, lasting about eight months, locked out at least 3.5 million students according to the World Bank.
This has left many private academic institutions struggling financially, with some indefinitely closing. All academic institutions in Rwanda resumed physical tutoring on February 23, 2021.
To create jobs and accelerate economic recovery, the government is now rolling out additional incentives targeting labour intensive sectors — construction and manufacturing — to lower the cost of doing business for the private sector under the Manufacture and Build to Recover programme.
Specific tax incentives include VAT exemption on imported construction materials not available in the region and those sourced domestically, as well as tax credits off-setting 2021 Pay-as-you-earn, Corporate Income Tax and tax credits on export revenues.