The National Bank of Rwanda (BNR) has announced it will maintain the key repo rate at 6% to continue to stimulate the financing of the economy by the financial sector.
BNR governor John Rwangombwa said that following the easing of inflationary pressures, the stable exchange rate and the fact that the current stance has been yielding good results, the monetary policy committee decided to maintain the benchmark rate for quarter four.
“The policy resulted into broad money expanded by 11% in the first eight months of this year, against 3% in the same period last year. Credit to the private sector increased by 8.8% from 10.6% last year, and new loans grew by 4.1% compared to 11.5% in the same period in 2016,” Rwangombwa observed.
The decisions were reached after the quarterly meetings of the Financial Stability Committee and the Monetary Policy Committees on 26th and 27th September.
Since December last year, the national bank has implemented an accommodative monetary policy stance. In December, it cut its benchmark interest rate to 6.25% from 6.5%, and in June it was further reduced to 6% to support economic growth.
Economy and financial sector
That economic growth picked up to 4% in the second quarter of 2017, compared to 1.7% in the first quarter and 7.5% in Q2 of 2016. In the first three months this year, the trade deficit reduced by 24.9% from $1,179.1m to $885.4m due to a decrease in formal imports by 7.9% in value and an increase in the value of formal exports by 44.9%.
The exchange rate of the Rwandan franc has been stable, depreciating by 1.8% between December 2016 and August 2017 compared to 8% in the same period a year earlier. Inflation also decreased from 6.2% in the second quarter of 2017 to 3.8% in July and 3.2% in August.
BNR also observed that the assets of the financial sector have continued to increase in the second quarter this year; total assets of the banking sub-sector increased by 13% year-on-year in June 2017 to Rwf 2.6 trillion. In the same period, assets of the microfinance sub-sector increased by 8% to Rwf 248 billion, those of the insurance sub-sector by 10% and those of the pension sub-sector by 13%.
However, non-performing loans slightly increased, for 8.1% in March to 8.2% in June among banks, and from 11.7% to 12.3% among micro-finance institutions. BNR attributes this to a slowdown in economic activity and inadequate monitoring of some large facilities.
Nevertheless, profits of banks and insurance companies keep growing. The total banking system’s net profit (after tax) grew by 11% to Rwf 21.5 billion in June, while the insurance sector saw a boost in profit of 85% to Rwf 18.5 billion.