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Rwanda's central bank maintains repo rate at 5.5pc

Tuesday September 25 2018
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John Rwangombwa, Governor of the National Bank of Rwanda. PHOTO | CYRIL NDEGEYA | NMG

By Johnson Kanamugire

Rwanda’s central bank has maintained the repo rate at 5.5 per cent, citing the need to further stimulate banks’ lending to the private sector.

Credit to the private sector grew by 7 per cent in the first eight months of this year, a drop from 7.2 per cent registered during the same period last year, and the National Bank of Rwanda (BNR) Monetary Policy Committee expressed doubts of achieving the 15 per cent credit growth target by the end of the year, blaming the slowdown to “structural challenges in the economy.”

These include credit risks, which made banks more cautious in lending after recording high bad loans last year.

BNR Governor John Rwangombwa, however, said that the committee was convinced that the level of the policy rate is accommodative enough to encourage the banks to lend more to the private sector.

“We are convinced that the level we are is good enough to support credit to the private sector through increased liquidity. What remains is to deal with the other issues that impact banks’ lending to the private sector,” Rwangombwa said.
“When we look at the liquidity since 2016 and the impact our monetary policy decisions had on the financial sector, it has been very positive. There is enough liquidity,” he added.

Rwanda projects that the economy will expand by 7.2 per cent this year, with BNR’s medium-term benchmarks for inflation and depreciation of the franc expected to remain low.

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National Institute of Statistics figures released recently show that Rwanda's economy grew by 6.7 per cent in the second quarter of 2018, from 4 per cent in the same period in 2017.

According to the central bank, inflation, which eased from 2.5 per cent in this year’s second quarter to 2.1 per cent in August, is expected not to exceed 5 per cent by the end of the year.

Exchange rate pressures have eased due to an increase in export receipts of 17.9 per cent, against formal imports growth of 7.4 per cent.

As a result, the franc depreciated by 2.5 per cent against the US dollar.

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