By KABONA ESIARA

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Rwanda’s central bank has cut its benchmark rate from 6.25 per cent to 6 per cent, the second such reduction this year, as it seeks to stimulate growth.

The National Bank of Rwanda (BNR) hopes by lowering the key lending rate it would further bring down inflation, reduce pressure on the franc and boost credit to the private sector.

Rwanda projects the economy to expand to 6.2 per cent this year from 5.9 per cent in 2016.

BNR governor John Rwangombwa said inflation has been on a “downward trend… and is expected to continue to decline to between 5 per cent and 6 per cent by the end of the year.”

Inflation eased in May to 6.5 per cent from 7.3 per cent in April on account of dropping food prices.

“Pressure on the exchange rate has significantly eased following the improvement in trade balance coupled with the completion of some big projects,” Mr Rwangombwa said.

The trade deficit improved by 22.6 per cent from Rwf624.6 billion ($749.7m) to Rwf484.7 billion ($580.6m) and is projected to narrow further as the country expands its manufacturing sector in the “Made in Rwanda” campaign.

The central bank said non-performing loans in the banking industry rose to 8.1 per cent from 6.2 per cent in March last year. The bank cited weak credit analysis of loan applications and poor project implementation.

READ: Rwanda central bank to target inflation in policy regime