The Rwanda Central Bank (BNR) has announced it has lowered the key repo rate (the rate at which BNR lends to financial institutions) by 25 basis points to 6% percent to encourage commercial bank to increase lending to the private sector.
BNR governor John Rwangombwa explained that the bank’s Monetary Policy Committee decided to change the rate for the third quarter of 2017 because of positive trends in inflation which is reducing pressure on the exchange rate, and the favorable developments in the monetary aggregates.
The quarterly Financial Stability Committee and Monetary Policy Committee meetings concluded that the financial sector remains adequately capitalized, liquid and profitable. The Financial Stability Committee noted an increase in non-performing loans and resolved to continue engaging banks and microfinance institutions to enhance their credit underwriting and monitoring practices.
“The Monetary Policy Committee observed a decline in inflation, stability in the exchange rate and increase in credit to private sector compared to the same period last year,” Rwangombwa said.
BNR projects inflation to be between 5.5% and 6% by the end of this year.
It was also observed that pressures on the franc’s exchange rate have significantly eased following improvement in the trade balance coupled with the completion of some big projects. Consequently, relative to December 2016, the franc had depreciated by 1.15% by 22nd June, compared to 4.6% in the same period last year.
Rwanda’s economy is expected to grow 6.2% this year compared to 5.9% last year. The real composite index of economic activities grew by 8.6% in the first five months of 2017 compared to 16.5% in the same period in 2016; total turnovers increased by 16.1% (9.7 last year); and the credit to the private sector went up by 6.9% in the past five months (6.6% in the corresponding period in 2016).