Rwanda’s trade deficit reduced by 1.4 per cent in the first five months of 2018, compared to 2017, latest statistics from the central bank show.

This was attributed to an increase in formal exports revenues by about 29 per cent which outweighed an increase in formal imports, at 9 per cent.

The trade deficit as of January this year had gone down to Rwf1271.8B from Rwf 1624.5B in 2016.

Central Bank Governor John Rwangombwa said that the trade deficit reduction was linked to good performance in exports in the period.

The governor was speaking after the quarterly Central Bank’s Monetary Policy Committee meeting on Tuesday.

The meeting reviews current economic conditions such as inflation and exchange rate pressures.

"Exports increased by 29 per cent. Though the import bill picked by about 9 per cent, it was outweighed by the good performance in exports. This is due to good performance in traditional exports, non-traditional exports as well as re-exports,” he explained.

The reduction of the trade deficit has seen the Rwandan Franc remain stable against the dollar with the central bank projecting that annual depreciation will be at around 4.5 per cent.

"Due to the good progress, exchange rate pressures remain subdued. The franc depreciated by 1.5 per cent in the first 5 months. We had projected depreciated to be at 4.5 per cent during the year,” he said.

The governor allayed fears that the hardening of the American dollar could have far reaching negative consequences on the Franc in coming days.

Countries are expecting disruption of their respective currencies due to the globalisation of economic trends as well as the increased performance of the United States economy.

Rwangombwa said that they expect the hardening of the dollar but not much shock that can be considered as a crisis for the Rwandan economy.

"We do not expect a shock as such. There might be hardening of the US dollar because of the increased performance of the US economy, but it is not something that would translate to a crisis on our part,” the Governor said.

He said that the franc was still below the projected 4.5 per cent depreciation rate for 2018.

Based on the current economic developments, projections and outlook, the Central Bank’s Monetary Policy Committee maintained the key repo rate at 5.5 per cent for the third quarter of 2018.

The key repo rate is the maximum rate at which commercial banks to invest their money at the central bank.

A low rate creates a scenario whereby banks make more returns when they invest with the private sector as opposed to when they invest it with the central bank.

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