Monday, March 28, 2016

Rwanda holds rate, accommodative stance yields results

    Rwanda's central bank maintained its key repo rate at 6.5 percent, saying the current accommodative policy stance "continues to yield expected positive results," including subdued inflation, improving aggregate demand and rising credit to the private sector.
    The National Bank of Rwanda, which last cut its rate by 50 basis points in June 2014, said inflation had remained below the bank's objective of 5.0 percent since December 2015 and declined to 4.4 percent in February from 4.5 percent in the previous two months.
    The central bank targets Rwanda's urban inflation rate while the consumer price inflation rate eased to 6.0 percent in February from 6.6 percent in the previous month, the third consecutive month of decline.
    The central bank added that outstanding credit to the private sector grew by an annual 23.7 percent in February compared with 19.2 percent in the same 2015 month, contributing to overall economic growth of 6.9 percent in 2015, slightly down from 7.0 percent in 2014.
    Last month the central bank's governor, John Rwangombwa, forecast growth of 6.3 percent this year, mainly due to smaller expansions in agriculture, construction and services sectors. He also said inflation was expected to remain within a 4.5 to 5.5 percent range this year.
   But a widening of the trade deficit by 12.7 percent in the first two months of this year to US$ 297.02 million exerted further pressure on the foreign exchange market, with the franc depreciating by 2.6 percent against the U.S. dollar as of March 24 from December 2015, the bank said.
    In 2015 Rwanda's franc depreciated by 7.4 percent against the dollar and was trading at 758.5 to the dollar today compared with 745 at the start of this year.
    The central bank also said profits in Rwanda's financial sector had continued to improve, with the return on assets in the banking sector up an annual 2.1 percent in December 2015 while non-performing loans (NPL) at 6.2 percent in December compared with 6.0 percent in December 2014 and 7 percent in December 2013.
    The central bank's target is to bring the NPL ratio below 5.0 percent.



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