Rwanda’s central bank has kept interest rates on hold to counter rising inflationary pressures and support the economic recovery.
The Central Bank’s Monetary Policy Committee (MPC) decided on Thursday to leave interest rates unchanged at 5. unchanged from the last quarter to contain inflation and support the economic recovery amid heightened risks, including rising domestic and global inflation.
“Projected international commodity prices are expected to be the main drivers of high inflation. The Committee noted that these inflationary pressures, surrounded by global uncertainties, could weigh negatively on domestic and global demand.
“The MPC…will continue to monitor the situation closely and stand ready to take further action if necessary” , said National Bank of Rwanda Governor John Rwangombwa.
Despite a recent surge in inflation, which is expected to rise sharply to 8 percent, well above the original forecast of 5 percent in 2022, the Rwanda’s economy is on the rise, a steady recovery from a pandemic-induced recession.
The Composite Index of Economic Activities rose 13.7 percent year on year in the first quarter of this year, up from 11.9 percent in the first quarter of last year.< /p>
The National Bank of Rwanda attributes the strong rebound in the first quarter to the government’s successful Covid-19 vaccination campaign and various government policies , including the NBR y’s multimillion-dollar stimulus fund and accommodative monetary policy, which helped improve economic activity in the first quarter of 2022.
In recent months, the country has seen key sectors of the economy, including tourism and hospitality, has successfully reopened.
The economy is expected to provide a strong boost to the economy by hosting the June 20-25 Commonwealth Health of Government Meeting (CHOGM) with up to 10,000 delegates in the country
“These economic policies will continue to support economic growth in the second quarter of 2022,” said Mr. Rwangombwa.
However, the central bank is cautiously optimistic as the current global environment remains volatile , which is likely to undermine the country’s growth prospects.
In particular, the recent surge in inflation, partly linked to the negative impact of the soot country-Ukraine war is likely to limit private consumption, according to the central bank.
“The scarcity and higher cost of some imported inputs, as well as unfavorable weather conditions that affected agricultural season A, are expected to have a negative impact on this year’s economic growth , which will remain strong but below [the] initially projected 7.2 percent,” Mr Rwangombwa said.
Rwanda’s economy is forecast to grow 7% in 2022, slightly below the expected 10, 2% in 2021 according to the latest figures from the International Monetary Fund (IMF).