Kinshasa, Kigali row spells trouble for regional economic recovery

The diplomatic feud between Kigali and Kinshasa threatens to undermine the region’s favourable economic outlook if tensions escalate as both sides trade accusations of aiding armed militias in the ......

 

 

By BERNA NAMATA

The diplomatic feud between Kigali and Kinshasa threatens to undermine the region’s favourable economic outlook if tensions escalate as both sides trade accusations of aiding armed militias in the volatile eastern DRC region bordering Rwanda.

In its latest sub-regional economic outlook report for Eastern Africa to be released next week, UNECA projects the region will marginally grow at 4.3 percent in 2022 — well above the continental forecast of 2.7 percent and the global 2.5 percent.

“This is a relatively good performance in East Africa when compared with others. However, compared to itself, a growth rate of 4.3 per cent this year shows a slower economic expansion from 2021, when we recorded an average growth rate of 6 per cent,” Mama Keita, Director, Sub-Regional Office for Eastern Africa, UNECA based in Kigali told The EastAfrican on Thursday.

Multiple shocks

However, the region now faces multiple shocks that have stalled recovery from the Covid-19 pandemic-induced economic downturn including climatic shocks that have intensified across the region with severe droughts and heavy rains being recorded more frequently and for longer periods than before.

The situation is worsened by the cost of living crisis, which is based on high fuel and food costs due to the Russian invasion of Ukraine earlier this year.

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“Added to this are the effects of internal tensions or security threats in the DRC, Ethiopia, Somalia and South Sudan. These multiple shocks are of course taking a heavy socioeconomic and humanitarian toll, with millions of lives and livelihoods at stake,. Keita said.

She underscored that the multiple crises not only negatively affect growth but also fuel other risks including the cost of living, the level of debt and the exchange rate — all of which affect the purchasing power of populations, reduce the fiscal space for governments and prevent them from investing and fostering growth.

Risk profile advisory

“This situation increases the vulnerability of countries,” she said.

Stakes remain high as analysts are also beginning to raise the risk profile of the region due to the ongoing crisis. For instance, in its latest rating released October 28, Fitch ratings gave Rwanda a ‘B+’ rating citing its low level of GDP per capita and persistent twin budget and current account deficits, which have resulted in high and rising public and external indebtedness.

While the country’s strong governance and highly concessional nature of its public sector debt mitigate these risks, analysts at Fitch said its outlook is negative with risks partly linked to the ongoing “adverse global economic and financing environment, and risks to grants and concessional government financing related to the conflict in the Democratic Republic of Congo.”

Fitch expects Rwanda’s real GDP growth of 5.9 percent in 2022 and 5.5 percent in 2023, largely driven by a strong rebound in tourism and service sectors. Inflation is expected to average 15 percent in 2022 and 12.5 per cent in 2023, before easing in 2024.

Rwanda’s Ministry of Finance and Economic Planning did not respond to our request for comment by press time on Fitch’s ratings.

Tensions remain

The forecast comes as tensions remain despite renewed regional diplomatic efforts to avoid an escalation.

Rwanda this week accused the Congolese government of violating its airspace after a Sukhoi-25 fighter jet from Congo briefly touched down at Rubavu Airport in Rwanda’s Western Province.

“No military action was taken by Rwanda in response, and the jet returned to DRC. Rwandan authorities have protested this provocation to the DRC Government,” the Rwandan government said in a statement issued 7th November.

In their defence, the Congolese government said its jet “unfortunately” entered Rwandan airspace and that it has “never harboured intentions of violating that of its neighbour’s.”

Despite the simmering tensions, officials have so far ruled out going to war.

In a recent communique after a meeting between foreign ministers of both countries in Angola’s capital, Luanda on November 5, both parties agreed “to continue the political dialogue between the leaders of the DR Congo and the Republic of Rwanda, as a way of resolving the bad political atmosphere between the two neighbouring countries.”

In Rwanda, officials have raised concern about “provocation” but maintain that they are committed to the ongoing regional mechanisms to resolve the standoff.