Tuesday, September 27, 2016

Rwanda holds rate, sees inflation at 6% end-2016

    Rwanda's central bank left its key repo rate at 6.5 percent, saying this was "in order to support the continued financing of the economy while mitigating inflationary and exchange rate pressures."
    The National Bank of Rwanda, which has maintained its rate since cutting it by 50 basis points in June 2014, said inflation was projected to be around 6 percent in December as prices of fresh products are expected to ease following the start of the rainy season.
   Rwanda's inflation rate eased to 6.4 percent in August from 6.9 percent in July - above the central bank's 5.0 percent target - following a rise in food prices and a higher pass-through of exchange rates to domestic prices.
    Due to an increase in the exchange rate pass-through, imported inflation rose to 5.5 percent in August and 5.5 percent in July from 3.9 percent in June, the bank said.
    In June the International Monetary Fund (IMF) forecast that Rwanda's consumer price inflation rate would average 2.5 percent this year, up from 1.8 percent in 2015, and rise to 4.6 percent in 4.6 percent.
    Inflation end-2016 was seen by the IMF at 4.5 percent and 4.7 percent end-2017.
    The exchange rate of the Rwandan franc has been steadily depreciating since 2008 and was trading at 805 to the U.S. dollar today, down 7.45 percent this year.
    Last year the franc lost 7.6 percent against the dollar after a depreciation of 3.6 percent in 2014.
    Rwanda is suffering a shortage of foreign exchange due to low commodity prices and in June it won an 18-month US$204 million standby facility from the IMF to boost its reserves.
    The fall in commodity prices has also lead to an 2.2 percent increase in Rwanda's trade deficit in the first eight months of this year, a move that along with additional foreign exchange demand from some big projects under the public-private partnership (PPP) framework, "has put pressure on the FRW exchange rate," the central bank said.



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