In the face of challenging economic trends, the Rwandan franc depreciated by 8.8 per cent against the US dollar in the first six months of 2023, according to the National Bank of Rwanda.

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This was announced, on September 20, during a presentation of the Monetary Policy and Financial Stability Statement by the central bank that assessed the economic performance of the first half of the year and prospects for the rest of the year.

John Rwangombwa, Central Bank Governor, said that it is the first time in 20 years that Rwanda has recorded a double-digit depreciation, with an overall total of more than 12 per cent currently.

He attributed the mismatch between the supply and demand for dollars to the widening of trade deficit which was at 23 per cent in the first half of the year, drawing from an 18.5 per cent increase in import bill against export earnings which increased by 11.2 per cent.

"It is an unusual pressure but we believe it will ease next year because we can see a decreasing trend in imports and increase in tourism revenue, among other avenues generating forex receipts,” Rwangombwa noted.

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The greenback is typically used as a major medium of commodity exchange globally, which means that once its demand goes up, so does its value.

With exception of the Eurozone, Rwanda’s imports are mostly bought in dollars, hence, if traders buy goods at high prices, they will be expensive for domestic consumption.

Figures from the central bank also indicate that the Rwandan franc also lost value against other major currencies, including a decline of 13.9 per cent against the pound, 10.7 per cent against the euro, and a lower appreciation of 0.4 per cent against the yen, after respective appreciation a year before.

Within the region, the currency appreciated by 4.5 per cent against the Kenyan shilling and by 20.2 per cent against the Burundian franc but weakened by 5.1 and 10.0 per cent against the Tanzanian shilling and Ugandan shilling, respectively.

However, in real terms, the franc actually gained 1.3 per cent value due to high domestic inflation outpacing the combined effect of weighted foreign inflation and nominal effective depreciation, according to the central bank.

"It's worth noting that this franc appreciation was slower than the 7.6 per cent appreciation recorded at the end of June 2022. With an appreciation of the real effective exchange rate, domestic products remain less competitive compared to foreign goods,” it stated.

By the end of June 2023, BNR’s international reserves had reached a level equal to 4.4 months of expected imports of goods and services, which is higher than the benchmark.

Major economies, including Brazil, Russia, India, China, and South Africa, collectively known as BRICS, strive to reduce their dependence on the US dollar through a process called de-dollarisation.