Wednesday, December 28, 2016

Rwanda cuts rate 25 bps in first easing since June 2014

    Rawanda's central bank cut its policy rate by 25 basis points to 6.25 percent, its first easing of monetary policy since June 2014, to support economic activity as food inflation has decelerated and is expected to continue to fall in the coming quarters as the harvest season sets in.
    The National Bank of Rwanda (BNR) added the economy was performing well but at a low pace compared with last year and in line with projected growth of 6.0 percent for 2017.
   Meanwhile, the Rwandan franc has continued to depreciate as the high import bill against low export revenues "continued to exert pressures on FRW exchange rate and on inflation," BNR said.
    The exchange rate of the franc has declined steadily for the last decade and was trading at 821.9 to the U.S. dollar today, down 9.4 percent this year.
    Rwanda's trade deficit narrowed by 5.1 percent in the first 11 months of the year to US$1.520 billion from $1.602 billion due to a 2.4 percent fall in formal imports compared with an increase in formal exports of 6.1 percent, the bank said.
    Including informal cross-border trade, exports covered one-third of imports in the January-November period compared with 27.2 percent in the same 2015 period.
    Rwanda's headline inflation rate eased to 6.4 percent in November from 7.4 percent in October as prices of fresh products fell by 1.2 percent on a monthly basis. But on an annual basis, fresh products prices were still up 13.7 percent, according to Rwanda's National Institute of Statistics.
    On average inflation in the third quarter rose to 6.4 percent from 4.9 percent in the second and 4.5 percent in the first quarter due to an increase in food inflation to 12.3 percent in the third quarter from 7.0 percent in the second quarter, the BNR said. It added the rise in food inflation was mainly due to higher prices of vegetables following the effects of a prolonged dry season.
    The central bank also said outstanding credit to the private sector grew by 7.4 percent in the first 11 months of the year, down from 26.9 percent in the same 2015 period, due to a slowdown new authorized loans to 4.0 percent as compared to 13.2 percent last year.
    Last month the International Monetary Fund noted Rwanda's economy had expanded by 6.5 percent in the first half of this year, with growth projections for the full year at 6.0 percent and likely growth of 6 percent in 2017.
    "Depending upon weather and agriculture, inflation is expected to get back toward the government's medium-term 5 percent target," the IMF said.


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