On Friday, at a plush lakeside hotel in Gisenyi, Rwanda’s western province, a single American dollar sold at Rwf 715; in the capital city Kigali, it was selling at over Rwf800; both cities are in the same country so why the difference in the exchange rate?

Part of the answer could be seen while standing on the hotel’s balcony overlooking the beach a few meters away where dozens of European and Asian tourists lazed around in the warm sand under the sun getting a tan.

Their presence in this tourism capital of Rwanda partly explained why the Franc was stronger in Gisenyi than it was in the country’s business and administrative capital Kigali where it was quoted at Rwf726.32 for a dollar by the interbank foreign exchange market on July 31.

Between the Rwf726.32 rate and the Kigali street quotes was a difference of over Rwf100, a development the Central bank blamed on speculation.

However, it’s also possible that the dollar is cheaper in Gisenyi because it is in plenty, thanks to supplies from tourists and to businessmen who trade in the Eastern DRC town of Goma but prefer to save and spend their money on the Rwandan side.

In a way, the Gisenyi exchange rate makes the point that trade and tourism are leading sources of foreign currency which helps to boost the value of the local currency.

Simply put, when tourists check in with dollars, they have to buy Francs because all services are paid for in the local currency; the demand for the local unit helps it to appreciate against dollar.

But the Gisenyi exchange rate also vindicates National Bank of Rwanda (BNR) Governor John Rwangombwa who mid this week said that the exchange rate in Kigali was ‘artificially created by speculators who were stockpiling dollars to sell on the black market.

Ripped off

Actually, on Wednesday afternoon, a city based media house manager was ripped off on the black market around Gisementi area where he bought dollars at an exchange rate of Rwf900.

He had walked into a forex bureau to buy US$5000 but was told he couldn’t get the amount he wanted; only about half of it was available and not at Rwf.750 quoted on the price board but at Rwf800.

"Chaps are hiding in corridors with money, you get out of the forex frustrated only for them to lure you into their cunning enterprise,” the manager told Sunday Times.

Although BNR says the economy is well liquidated with dollars, it appears speculators have whipped all the greens from the market creating an artificial scarcity that has pushed the exchange rate higher than normal.

"Under normal rates, you shouldn’t pay more than Rwf750 for a dollar; anything more than that is an artificial rate caused by speculators,” Rwangombwa said.

Some dealers accused BNR of arm twisting them to trade at a price lower than market forces a claim that the governor vehemently denied.

In fact starting Monday, BNR is likely to put more dollars on the market to nip the bubble created by speculators; however, the sustainability of this approach is questionable given that Rwanda’s current account deficit has widened in recent months due to weak export earnings.

Depending on how determined speculators are; they could easily buy out the new supplies from BNR to protect their black market from which many of them are currently earning more than Rwf50 on every dollar they sell.

But a tough sounding Rwangombwa assured the public this week that he has declared war on the black market and he expects to emerge winner. "They will lose,” he said.

East Africans sob

Exchange rate woes haven’t spared other countries elsewhere in the region and central bank governors are under pressure to rein in the bullish dollar that has left most East Africans sobbing although a few such as landlords and dollar salary earners, are rejoicing.

The Kenyan shilling which is normally cushioned by huge foreign currency earnings from its strong tourism and export sectors, has depreciated by almost 12 percent in recent months due to poor performance of two sectors.

International tourists’ numbers dropped to a seven year low between January and June 2015 widening the country’s current account deficit, announced Kenya’s national statistics bureau in a week that also saw Kenya Airways announcing oversize losses.

In January, Citigroup Africa predicted that Kenya’s widening current account deficit would weaken the shilling to an exchange rate of Ksh94.50 for a dollar; that prediction has since come true with the K-shilling trading at Sh102.15 in most of Nairobi for a dollar, on July 31.

These are surely bad times for the Kenyan shilling which averaged 78.13sh for a dollar between 1993 and 2015.

Ordinary Kenyans have already started feeling the pinch in form of rising market prices for commodities and rental fees for housing pushing skyward the cost of living in East Africa’s largest economy.

In Tanzania, East Africa’s second largest economy, the country’s shilling has lost 20.2 percent of its value to the dollar and the same factors bedeviling the Kenyan shilling have been blamed for the T-shillings July 31exchange rate of Sh2115.45 for a dollar as was quoted on the interbank foreign exchange market.

The Tanzanian currency exchanged at an average rate of Sh1385.96 for a dollar since 2003 but in June 2015, it hit an all time high of Sh2260.80 sending Tanzanian inflationary pressures into a frenzy.

At the end of June, a radio station in Dar-es-Salam had to suspend contracts of three of its top presenters who had signed market rate dollar salaries ranging from US$1500 to US$2500.

With the turbulent exchange rate, the radio presenters were technically getting a pay rise every month until management renegotiated with the staffers to have the salaries revised at a fixed rate.

These exchange rate woes have perhaps been craziest in Uganda, East Africa’s third largest economy where the U-Shilling ended July trading at Sh3410 for a dollar, on the interbank foreign exchange market. 

The Uganda exchange rate which has averaged Sh2659.92 for a dollar since 2009 shocked Kampala traders mid July when it traded at 3575 Shillings.

In the wake of a weakening shilling, some Kampala landlords moved to fix rental fees in dollars forcing traders to hit the streets in protest. 

"We are not Americans, why pay rent in dollars,” read some of the placards carried by protesting traders.

Why are regional currencies falling?

In separate interviews with the press in their respective countries, EAC Central Bank Governors attribute their currency woes to a strengthening dollar due an American economy which has been gradually recovering its pre-financial crisis health.

Rwangombwa reiterated that factor this week making it clear that some of the factors behind the Franc depreciation were well out of his control.

There’s a capital flight of sorts as dollars leave the rest of the world to return home to USA where every single dollar invested is returning more profits than before hence denying the region much needed dollar inflows from foreign direct investments.

Even American Petro-dollars have reduced from the international market since USA is no longer importing that much crude oil because it has plenty of supplies from local production.