Rwanda holds rates, upbeat on growth

Rwanda kept its key repo rate at 6.0 per cent on Tuesday to support lending in the central African nation and its central bank said economic growth in 2011 was likely to exceed an initial forecast of 7 per cent.

Central bank governor Claver Gatete also said he aimed to keep inflation below 7.5 per cent.

“Considering current developments and outlook in economic fundamentals, the central bank monetary policy will remain accommodative to sustain lending to the economy consistent with the growth objective in 2011,” Mr. Gatete said when presenting a monetary policy statement.

The bank has kept the repo rate steady since November when it cut it to 6 per cent from 7 per cent to stimulate credit lending to the private sector.

Consumer prices in urban areas rose to 5.82 per cent in June, in line with a trend across the east African region, where inflation has risen sharply due to poor food harvests and higher oil prices.

The country has fared better than other countries in east Africa, including Kenya and Uganda, where inflation is in double-digits, which could have some spillover effects into Rwanda.

“Inflation in Rwanda might be manageable but there are serious risks based on the regional economic trends especially with what is happening in the east African community with instability in Kenya, Uganda and Tanzania,” Trade Minister Francois Kanimba, a former central bank governor, told Reuters.

“If you look at our exchange rates, there is a real depreciation on real exchange rates. There must be measures to make us ready for spillovers like imported inflation.”

Finance Minister John Rwangombwa had forecast his country’s economy, which is highly dependent on agriculture, to grow by 7 per cent this year.

Mr. Gatete said improvements in the mining industry, among other factors, would help push the growth forecast beyond the initial projection.

“We continue to see good performance in the mining industry in the first half of 2011, where export volumes increased by 5.4 per cent in value, reaching $72.5-million (U.S.) from $27-million in the same period,” he said.