Rwanda’s fresh food inflation which is the major driver of inflation continues to fluctuate and has hit a record high of 41 percent, according to the National Institute of Statistics.
The inflation continues to increase amid increases in regional food imports which has helped to stabilize prices. Rwanda’s Consumer Price Index (CPI), the main gauge of inflation, increased by 31.2 percent year on year in October 2023 down from 17.9 percent in September 2023.
In October 2023, ‘Food and non-alcoholic beverages’ increased by 27 percent on an annual basis.
The trend has increased food prices and cost of living, making it out of reach of many Rwandan families. To address concerns about the high cost of living, the government took action by removing the value-added tax (VAT) on several commonly consumed food products.
Staple foods including Irish potatoes, maize flour, and rice, were put under price regulations in April. The regulations met with resistance from shop owners and never caught on.
Heavy investment in agriculture to curb food security
Rwanda’s agricultural yield has declined since 2021. Last year saw a decrease of 3 percent in the production of staples such as beans. Harsh weather changes, prolonged droughts, and floods that ravaged Rwanda’s top food producers in western and northern Rwanda have been blamed for shrinking yields.
At COP28 in Dubai, the European Investment Bank and the Bank of Kigali on December 2 confirmed an agriculture financing initiative, to support private sector investment in Rwanda. The scheme will provide a substantial boost to smallholders, businesses, and enterprises dependent on climate-vulnerable a hi griculture across Rwanda.
The initiative is expected to unlock Euro 100 million in new climate investment by smallholder farmers and agribusiness, as well as improve access to finance by businesses owned by women.
Climate change continues to make agriculture challenging despite being the biggest employer of Rwandas with 61 percent of Rwandans on the labor market working in agriculture. The sector also accounts for 30 percent of Rwanda’s Gross Domestic Product (GDP).
During the fiscal year 2022-2023, Rwanda spent Rwf 2.7 trillion in advancing agriculture. Despite the shocks, the Rwandan economy is expected to remain on track- 6.3 percent in 2023 supported by a rebound in trade services, tourism, and the construction industry.