What is currency fluctuation? It is the systematic depreciation of a country's local currency against USD/EUR. Such fluctuations are more common in countries whose economy is depedent on imports and often times fragile. With its description in the Cambrigde dictionary; a situation in which prices, levels or interest rates go up and down.
The Covid 19 pandemic has caused serious financial losses all over the world. Especially many workplaces, factories, offices and places where the public receives services have come to the point of closure while many people have their jobs.
Financial losses in businesses that were closed due to the effect of the pandemic all over the world increased day by day. Both business owners and employees were in financial trouble due to the restrictions taken as a precautionary measure.
The high numbers of deaths in many countries, the panic among people, the unpreparedness of health systems for such a disaster and the cessation of production channels also dealt a serious blow to the currencies of countries.
One of the most serious financial negativities of the pandemic is the increase effect on local exchange rates. Especially in East African countries such as Rwanda, where a large part of their economy is based on imports, the purchase and sale prices of products increase as the foreign currency rates rises in a regular upward trend.
Since many products enter the country on a dollar basis, import products automatically increase with every exchange rate increase. Such situations constantly reduce the purchasing power of the people, making them financially difficult. We see a similar situation in my own country, Turkey.
With the effect of the pandemic, the Turkish Lira lost a lot of altitude against the US Dollar. As a result, electricity, fuel, food and basic necessities prices are all going up, which unfortunately lowers the living standards of the people.
There is a way to end this situation in the medium term and turn the situation into a positive one, which is to increase local production by making industrial reforms. As far as I follow closely, Rwanda has taken very serious steps in this regard and is one of the leading countries of the African continent in terms of both increasing its production with its own technology and attracting foreign investors to the country.
As of today, Rwanda is a country that assembles its own vehicles and manufactures its own mobile phones. This sets an important example for developing African countries.
As it will be remembered, the President of France, Emmanuel Macron, paid a visit to Rwanda in the past months. According to my comment, one of the issues that French President Macron gave importance during his visit to Rwanda was to stimulate commercial developments between France and Rwanda.
This visit is an encouragement for the French investors to come to Rwanda, and invest. I believe Macron has goal of finding friends and potential business partners in new corners of Africa as countries like China, India, Brazil and Turkey compete for influence there.
Although the main purpose of this visit seems to be political, the real target is to increase the trade relations between Europe and Rwanda. Rwanda is preparing to take itself to a higher level at its geography, with its developing economy, industry and increasing young population. Rwanda, which has been stable and growing for many years, is one of the most popular and suitable markets for foreign investors who want to enter the African market.
Despite the distress caused to the economy by the pandemic conditions, it will increase its exports both by strengthening its domestic production even more and by embracing foreign investors in the post-pandemic period.
This is one of the most important signs that exchange rates will become more stable in the medium term. Authorities have a very clear view that Rwanda will have a much more resilient economy in the medium term with the reforms and incentives given today.