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Cablegate: Rwanda Monthly Economic Review

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DEPARTMENT FOR AF/C
DEPARTMENT PASS USTDA: EEBONG
DEPARTMENT PASS USTR: WJACKSON
DEPARTMENT PASS COMMERCE: RTELCHIN
DEPARTMENT PASS OPIC: BCAMERON
ADDIS FOR LISA BRODEY

E.O. 12958: N/A
TAGS: EFIN ECON PGOV EINV ENRG ETRD EPET BTIO RW
SUBJECT: RWANDA MONTHLY ECONOMIC REVIEW

(SBU) This edition of the monthly economic roundup
includes:
-- Regional Security: Kenyan Violence Affects Rwandan Gas
Prices
-- Commercial News:
-Rwandan Stock Market Launched
-Tourism is Large Foreign Currency Earner in 2007
-New Immigration Forms to Capture Tourism Trends
-Tea Revenue Expected to Rise in 2008
-Cold Room at Airport Gives Boost to Horticulture Exports
-- Donor Support for Energy: Belgium and EU Award Major
Energy Grants
-- Macro Economic Indicators: Higher Tax Revenues Projected
for 2008


REGIONAL SECURITY:
------------------
2. (SBU) Kenyan Crisis & Gas Prices: In the wake of the
contested Kenyan elections and continuing violence, the
Government of Rwanda (GOR) twice increased gas prices, most
recently from USD 1.10 to USD 1.30 per liter. The
Commerce Minister initially told businesses and consumers
that the situation in Kenya would not require increased
prices. As shortages continued, however, the government
imposed modest increases. Rwanda has imported one million
liters of fuel in the last three weeks (escorted through
the most violent areas of Kenya) while needing
approximately 130,000 liters of fuel per day. Rationing in
the immediate aftermath of the election was lifted within a
week as supplies arrived from Kenya and Tanzania (the
government placed an order for 45 million liters of fuel
from Dar es Salaam). (Note: the government subsidizes 60
percent of the cost of fuel imports and has sole authority
to set pump prices. Eighty percent of Rwanda?s dry goods
also arrive through Kenya; transport routes through
neighboring Tanzania are longer and more expensive).

COMMERCIAL NEWS
----------------
3. (SBU) Stock Market Launch: The Rwanda Over the Counter
Stock Market (ROTCM) was launched by President Paul Kagame
on January 31. ROTCM will offer two debt securities to the
public, a 20 billion Rwandan franc treasury bond from the
Central Bank (BNR) issued with a maturity of two years and
an interest rate of eight percent, and a Rwanda Commercial
Bank (BCR) five-year corporate bond at nine percent. The
Capital Market Advisory Council (CMAC), a government bodyQ }1QQ&Q]Q/"Q7Q) ROTCM, but officials have expressed
a desire for privatization of the market once it matures.

4. (SBU) Tourism: The tourism industry became the top
foreign currency earner in 2007, overtaking coffee and tea.
Almost 40,000 tourists visited Rwanda last year, spending
over USD 42.7 million; coffee and tea earned USD 35.7
million and USD 31.5 million respectively. The Rwanda
Office of Tourism and National Parks (ORTPN) credits the
increased revenue to new hotels, an increased number of
flights from abroad, and the acceptance of Visa and Master
Cards by area businesses.

5. (SBU) The Immigration Department, in collaboration with
ORTPN, introduced new arrival and departure forms. The new
system will improve the collection and reporting of tourism
statistics and assist in better documentation of tourism?s
role in the national economy.

6. (SBU) Tea Revenue: According to the Director General of
Ocir-The (the Rwanda government tea authority), tea exports
will generate USD 38 million in 2008. He expects to export
Qwill generate USD 38 million in 2008. He expects to export
20,000 tons of tea as a result of privatization and the
restructuring of Ocir-The. The Rwanda tea sector has a
total of twelve thousand hectares (close to thirty thousand
acres) of tea plantations, of which 70 percent are owned
and operated by growers' cooperatives. Concerns were
raised when the tea auction in Mombasa was suspended for a
week in early January, as about 70 percent of all Ocir-The
tea is sold at the weekly auction. If the ongoing
political turmoil in Kenya leads to a prolonged suspension
of the auction, there could be a significant impact on
Rwandan tea revenue.

7. (SBU) Horticulture: With the construction of a cold
room at Kigali Airport with Dutch funds, horticulture
exports are expected to significantly increase. Prior to
the construction of the new facility, only roses, apples,
bananas and Dracaena Ornamental plants could be shipped.
The new
cold room now allows passion fruit, snow peas,
pineapples, Japanese plums and geranium oil (an essential
oil for perfumes) to be added to the list of exportable
products. Peter Muvara, Chairman of Rwanda Horticulture
Task Force, said the country currently exports three to ten
metric tons of horticulture products a week; the cold room
increases capacity to thirty metric tons of perishable
products. Horticulture exports earned USD 0.7m in 2005 and
USD 2.5m in 2006. These figures are expected to increase
significantly for 2007 and 2008.

DONOR SUPPORT FOR ENERGY
------------------------
8. (SBU) Belgium Aid: On December 19, 2007, the Belgium
Ambassador signed an agreement providing a grant of USD
34,007,352 to the GOR. The grant will be used to develop
horticulture and construct two micro-hydro power plants of
thirty kilovolt (KV) and two Mega Watt (MW) in the North
and West provinces respectively.
9. (SBU) EU Aid: The European Union (EU) announced it
would help fund a five-year energy plan focused on bringing
electricity to remote rural areas. The project is expected
to cost around USD 25.4 million. The EU will contribute a
grant of USD 14.6 million, with the balance covered by the
GOR. The project envisions the construction of micro-hydro
electricity plants at various sites to power roughly 15,000
households. New solar energy systems will bring
electricity to over 350 of the nation?s rural institutions
such as health centers, schools and government offices
throughout 150 of Rwanda's 416 sectors.
MACRO ECONOMIC INDICATORS
--------------------------
10. (SBU) Tax Revenues: The Rwanda Revenue Authority (RRA)
has set a target of close to USD 490 million in taxes for
2008, 6.3 percent higher than last year?s collections. The
Commissioner General expects the increase to come from
increased efficiency and reforms in the tax collection
system, including increased tax collections from the
informal business sector and reduction of tax evasion by
tax payers generally. However, this revenue projection may
now be unattainable given the adverse impact the situation
in Kenya has had on transportation routes and the import
and export of various goods.
ARIETTI

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