Trade and Market Disruptions: Impact on Growth, Food Security and Poverty in Rwanda

1. The Ukraine Crisis & African Economies
Trade and Market Disruptions: Impact on Growth, Food Security and Poverty in Rwanda
Dr. Ismael FOFANA
Director, Capacity & Deployment
AKADEMIYA2063

2. Outline
1. Global Commodity Price Shocks
2. Country Exposure and Terms of Trade Shocks
3. Analytical Framework
4. Simulation Scenarios
5. Results
6. Conclusion

3. 1. Global Commodity Price Shocks
Substantial increases in global prices of primary commodities under the Ukraine crisis
-40
-20
0
20
40
60
80
100
120
140
160
Coal,
Australia
Crude
oil,
Brent
Natural
gas,
Europe
Natural
gas,
U.S.
Liquefied
natural
gas,
Japan
Cocoa
Coffee,
Arabica
Coffee,
Robusta
Tea,
average
Coconut
oil
Groundnut
oil
Palm
oil
Soybean
meal
Soybean
oil
Soybeans
Barley
Maize
Rice,
Thailand,
5%
Wheat,
U.S.,
HRW
Bananas,
U.S.
Meat,
beef
Meat,
chicken
Oranges
Shrimp
Sugar,
World
Logs,
Africa
Logs,
S.E.
Asia
Sawnwood,
S.E.
Asia
Cotton
A
Index
Rubber,
RSS3
Tobacco
DAP
Phosphate
rock
Potassium
chloride
TSP
Urea,
E.
Europe
Aluminum
Copper
Iron
ore
Lead
Nickel
Tin
Zinc
Gold
Silver
Platinum
Post-Crisis Forecasts Pre-Crisis Forecasts
Fertilizer
Food
Projected Changes in Global Commodity Prices before and after onset of Ukraine Crisis (%)
Source: Compilations from the Commodity Market Outlook, World Bank (2021 and 2022). Note: Pre-crisis forecasts and post-crisis forecasts are price projections released by the World Bank in October 2021 and October 2022, respectively.
Fuel

4. 2. Country Exposure and Terms of Trade Shocks
• Export basket of primary
commodities dominated by
mineral products
Commodity
Share
Exports
Pre-Crisis Forecasts Post-Crisis Forecasts
2022 2023 2024 2022 2023 2024
Gold 69.5 -2.8 -1.1 -1.6 -1.4 -4.2 -2.9
Coffee 7.4 -6.9 -1.2 1.2 30.8 -6.8 -1.6
Tea 6.1 -3.3 -1.9 0.7 15.2 -9.7 0.7
Tin ores 2.2 -4.3 -4.8 0.3 -4.3 -29.0 1.2
Global Prices of Top Export Commodities (% Annual Changes)
Commodity
Share
Imports
Pre-Crisis Forecasts Post-Crisis Forecasts
2022 2023 2024 2022 2023 2024
Iron and steel 9.0 -19.6 -7.7 0.4 -25.8 -16.7 -2.0
Fish products 3.9 9.5 -3.3 0.8 -1.5 3.7 2.1
Sugar products 2.4 -5.1 2.7 0.6 2.6 -5.0 0.0
Wheat and meslin 1.2 -20.6 -2.0 0.3 36.5 -4.7 -1.2
Petroleum oils 1.1 5.1 -12.2 -2.9 42.0 -8.0 -13.0
Fertiliser 0.6 12.5 -19.8 -7.6 76.9 -11.2 -10.6
Global Prices of Top Import Commodities (% Annual Changes)
• Import basket of primary
commodities dominated by
iron, fish and sugar
• Wheat, petroleum oils, and
fertilisers: 3% of imports
• Coffee and tea: 14% of exports

5. • Relatively high exposure of Rwanda to the global markets of petroleum, wheat and fertilizers
Wheat (AATM, 2020)
Import dependency (to Russia and Ukraine) rate 44%
Import penetration rate (Import/Consumption) > 100%
Fertilizers (AATM, 2011-2020)
Import dependency (to Russia and Ukraine) rate 13%
Import penetration rate (Import/Consumption) = 100%
2. Country Exposure and Terms of Trade Shocks (Cont.)
Petroleum oils (AATM, 2020)
Import dependency (to Russia and Ukraine) rate: 0%
Import penetration rate (Import/Consumption) = 100%

6. • Rwanda exposes indirectly DRC to global wheat market shocks through regional re-exports
Exporter
COMESA Importer
Comoros DR Congo Eswatini Kenya Madagascar Malawi Mauritius Rwanda Seychelles Zimbabwe
Burundi 10.702 0.094 0.039
Botswana 0.038
Mozambique 0.394 0.143 0.427 0.686
Mauritius 1.330 0.563 0.989
Malawi 0.021 0.180
Namibia 0.001
Rwanda 29.399 0.161
Uganda 0.011 1.502 0.002
Wheat re-exportation within the Common Market for Eastern and Southern Africa (COMESA) in 2020, million USD
Source: AATM 2022 Database
2. Country Exposure and Terms of Trade Shocks (Cont.)

7. • Deterioration of the terms of trade in 2022 and 2024
Import and Export Price Indices, Percentage Point Changes Between Pre-Crisis and Post-Crisis Forecasts
6.6
-2.8
-0.5
8.0
-1.5
-0.6
2022 2023 2024
Export Price Index Import Price Index
2. Country Exposure and Terms of Trade Shocks (Cont.)

8. 3. Analytical Framework
• Simulation models (Akademiya2063/ReSAKSS Toolbox)
 Single-Country CGE Models
 Micro-Simulation Models
• World Development Indicators database (World Bank)
 Macroeconomic data
• African Agricultural Trade Monitoring (A2063 & IFPRI)
 Import and export data
• World Economic Outlook (International Monetary Funds)
 Economic Growth Outlook
• Primary commodity price database (World Bank)
 Annual price predictions for 46 primary commodities
(released in April and October)
Update the Simulation
Models (Step 2)
Build the Simulation
Scenarios (Step 3)
Customize Simulation
Models (Step 1)

9. 4. Simulation Scenarios
“Baseline” scenario
No major changes in the economies’ trajectories in the absence of the crisis
for the period 2022-2024.
 Economic Growth Outlook 2022-2024 (IMF, October 2021)
 Commodity Market Outlook 2022-2024 (World Bank, October 2021)
“Ukraine” scenario
Disruptions to the individual country economies resulting from the changes
in global commodity trade and markets
 Commodity Market Outlook 2022-2024 (World Bank, October 2022)
 Economic Growth Outlook 2022-2024

10. 5. Results: External Trade Effects
-4.6
-6.6
-2.5
-0.7
-6.8
1.4
2022 2023 2024
Exports Imports
Import and Export Volumes, Percentage Point Change between
Ukraine and Baseline Scenarios
• Export volumes decrease driven by export price and output decline
• Imports volumes decrease as nonfood imports prices decline and food imports substitute with local supply

11. 5. Results (Cont.): Economic Growth Effects
• Projected GDP growth rate (6%)
to be cut by half in 2022 and 2023,
and recovery in 2024
-3.1 -2.5
0.6
2022 2023 2024
• GDP on a lower growth trajectory
than in the absence of the crisis
-2.9
-5.2
-4.7
2022 2023 2024
• GDP loss 2022-2024 equivalent to 14
percent of GDP in 2021
GDP Growth Rate, PP Change Ukraine vs. Baseline
GDP Level, % Change Ukraine vs. Baseline

12. 5. Results (Cont.): Employment Effects
• Projected Employment growth
rate to slow down
• Employment on a lower growth
trajectory than in the absence of
the crisis
• Employment loss 2022-2024
equivalent to 15 percent of GDP in
2021
Employment, PP Annual Change Ukraine vs. Baseline
-2.5 -2.2 -2.8
2022 2023 2024
Employment Level, % Change Ukraine vs. Baseline
-2.4
-4.5
-7.1
2022 2023 2024

13. 5. Results (Cont.): Income and Price Effects
0
2
4
6
8
10
All Rural Urban
2022 2023 2024
0
2
4
6
8
10
All Rural Urban
2022 2023 2024
-6
-4
-2
0
2
4
All Rural Urban
2022 2023 2024
Consumer Price Index, All Products, %
Change Ukraine vs. Baseline
Consumer Price Index, Food Products,
% Change Ukraine vs. Baseline
Household Gross Income, % Change Ukraine vs. Baseline
• General inflationary
pressures and the
rising cost of food
• Mixed income
effects over 2022-
2024 and between
urban and rural
households

14. 5. Results (Cont.): Food Security Effects
-8
-6
-4
-2
0
All Rural Urban
2022 2023 2024
-8
-6
-4
-2
0
All Rural Urban
2022 2023 2024
Household Consumption, All Products, %
Change Ukraine vs. Baseline
Household Consumption, Food Products,
% Change Ukraine vs. Baseline
• Adverse food consumption effects, more
pronounced for urban than rural households

15. 5. Results (Cont.): Poverty and Inequality Effects
• Income inequality
decreasing and
monetary poverty
increasing
0.8 1.0 0.8
2.0
2.5
1.8
3.1
4.1
2.7
National Food International
2022 2023 2024
Headcount Poverty Indices, % Changes Ukraine vs. Baseline
2022 2023 2024 Total 2022-2024
National 49,057 118,601 184,910 352,568
Food 28,378 70,782 114,463 213,623
International 53,050 126,368 193,487 372,905
Number of Poor, Changes Ukraine compared Baseline Scenarios
2022 2023 2024
Gini Index -1.7 -2.9 -2.7
Income inequality, % Changes
Ukraine vs. Baseline

16. • Government Response
to the Global Fertilizer
Trade and Market
Disruptions
Type of fertilizer Price without state
subsidy (FRW/kg)
Level of Government
subsidy (Frw/ kg)
What a subsidized
farmer pays (Frw/kg)
Urea 1257 503 (40%) 754
DAP 1428 600 (42%) 828
NPK 17:17:17 1530 648 (42%) 882
KCL/MOP 1307 431 (33%) 876
Fertilizer prices Season 2023A (August 2022-January 2022)
Fertilizer prices Season 2023B ( February-June 2023)
Type of fertilizer Price without
state subsidy
(FRW/kg)
Level of Government
subsidy (Frw/kg)
What a subsidized
farmer pays (Frw/kg)
Urea 1143 503 (40%) 640
DAP 1322 600 (45%) 722
NPK 17:17:17 1302 648 (50%) 654
KCL/MOP 1257 431 (34%) 826
6. Conclusion
• GDP Growth estimate
and projections
(WEO, April 2023)
2022: 6.8%
2023: 6.2%
2024: 7.5%

17. THANK YOU