The scarcity of US dollars in the country continues to worry the market, with experts noting that the on-going international challenges will heap more pressure on the Rwandan franc.

Last month, the Rwandan franc depreciated by 0.76 per cent against the US dollar with the central bank trading the greenback at Rwf712.4/726.7 on the last day of June, up from Rwf707.6/721.2 at the start of June, according to a statement from the National Bank of Rwanda (BNR) issued last week. The local unit depreciated by 0.49 per cent in May.

Yesterday, BNR quoted the dollar at Rwf714/728, while commercial banks and forex bureaus quoted it at an average Rwf740/752.

Fred Karangwa, the manager of Platinum Forex Bureau, said accessing dollars has been a challenge over the last two months, noting that commercial banks are claiming that BNR is not selling them hard currency. Forex bureau dealers buy foreign currency from commercial banks, while banks get from the central bank.

"The demand for dollars is high which has exerted a lot of pressure on the Rwanda franc. The greenback now goes for Rwf752,” he noted. Forex bureaus quoted the US dollar at an average Rwf745/752 this week, up from Rwf722/725 at the beginning of June.

The euro and British Pound were relatively stable for most of last month, with the euro trading at around Rwf800/830 and British Pound at Rwf1020/1130 according to Karangwa.

BNR maintains that it always intervenes in a timely manner to avoid further depreciation of the franc.

However, the Rwanda franc recorded a lower depreciation level against the US dollar last month compared to other regional currencies. The Uganda and Kenya currencies depreciated by 7.91 and 0.89 per cent, respectively, during the period. The Tanzania shilling was the star performer, appreciating by 5.73 per cent over the reporting period.

"The dollar has gained against all the other currencies globally, so it is not an isolated case of Rwanda or East African Community (EAC). There is a crisis in Greece and also a stock market problem in China, which is affecting the price of commodities,” explained Sanjeev Anand, the managing director of I&M Bank Rwanda.

Anand said these and other pressures in the international economic arena have, for instance, also pushed down mineral prices since China is a big minerals importer.

"The other thing is that all currencies globally are depreciating which has led to more depreciating pressure on the franc and shortage of dollars in the market.

"Compared to other countries in the EAC bloc, we are much better. The Tanzania shilling is appreciating because it had earlier lost a lot of ground.”

He added that whenever a crisis takes place in the world, there is always ‘flight to quality’ (an action of investors moving their capital away from riskier investments to the safest possible investment vehicles), a situation that often hurts emerging markets’ currencies.

"So we are suffering for two reasons; one is the downward pressure because of the strength of the dollar, and there is also pressure on Rwandan exports because mineral and coffee international prices have gone down,” explained Anand.

He was, however, optimistic that the franc’s depreciation would be minimal for the rest of the year as exports have started to improve.

The Rwandan franc depreciated by 3.62 per cent during the first six months of the year, whereas the Uganda, Tanzania and Kenya shilling weakened by 18.95, 13.82 and 8.78 per cent, respectively against the US dollar.

Indeed, the current depreciation of all EAC currencies is mainly attributed to the strength of US dollar at international level whereby in the first half of this year, the US dollar appreciated by 7.54 per cent against the euro.

Huge ongoing infrastructure projects in the region have also contributed to high demand for dollars, piling pressure on the EAC bloc’s units.