Rwanda’s trade deficit grew in the first two months of this year when compared to the same period last year.

According to a statement from the central bank yesterday, the country’s trade deficit widened to $297.2 million (about Rwf232.4 billion) largely due to an increase in formal imports that rose by about 7.2 per cent, as well as a 9.7 per cent decrease in the value of Rwanda’s exports. Trade deficit is the difference between imports and exports, with the former being higher in this case.

The international trade developments were among the focus of discussions during yesterday’s quarterly financial stability committee and monetary policy committee meetings chaired by the National Bank of Rwanda (BNR) governor, John Rwangombwa.

Comparing the international trade trends with the same period last year, the committees observed that the widening trade deficit had exerted pressure on the foreign exchange market and depreciation against the dollar.

This comes as the country is conducting a national campaign promoting consumption of locally-made products to reduce formal imports and, consequently, the trade deficit.

The Made-in-Rwanda campaign aims at promoting locally-made goods and services which have for long faced stiff competition from imports, which most Rwandans think are superior even when they are of poor quality.

Beyond encouraging local consumption, the Ministry of Trade and Industry in collaboration with the Private Sector Federation (PSF), have been working to strengthen capacities of local producers to enhance product quality and competitiveness.

To reduce the pressure on the foreign exchange market and the local currency depreciation against the dollar, BNR in January announced Rwanda had teamed up with other countries in the East African Community bloc to allow the use of local currencies across borders.

The reduction of the reliance on the dollar in intra-regional trade is expected to cushion Rwanda and her neighbours from depreciation of their respective national currencies amid a more bullish US dollar. Last year, most regional currencies dipped following the strengthening US dollar, and weak export earnings in the region due to low commodity prices on the international market.

The BNR committees’ meetings further noted the outstanding credit to the private sector grew by 26.7 per cent in December 2015 compared to 19.6 per cent in December 2014. "On the domestic side, the National Bank of Rwanda continues to implement an accommodative monetary policy in 2016,” the statement signed by Rwangombwa read in part.

The committees further noted that the financial sector remained stable and sound, pledging to further strengthen the regulatory and supervisory functions and support development of financial institutions.

"In view of the above key economic and financial developments, and the fact that the current policy stance continues to yield expected positive results, the monetary policy committee decided to maintain the key repo rate at 6.5 per cent for the second quarter of 2016,” the statement further read.

Repo rate is the discount rate at which banks borrow from central bank. A reduction in the repo rate means banks get money at a cheaper rate, while an increase means borrowing from the central bank becomes more expensive. The central bank has maintained the repo rate at 6.5 per cent since June 2014, which experts say has stimulated lending to the private sector to spur support economic growth.

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