The East Africa Securities Regulatory Association (EASRA) meeting in Gisenyi has resolved to fast track the adoption of the East African Community (EAC) common market protocol that will take effect from July 1, 2010.

Among the key priorities of the EAC common market protocol, is the free movement of goods and services and the regionalization of the markets.

"The regionalization of the capital markets is in accordance with the common market protocol since it would enable operations of market players across the region,” said Olivier Kamanzi, the Deputy Executive Director of Rwanda Capital Market Advisory Council CMAC).

The EAC securities regulators were also seeking to adopt the EASRA certification programme for training and examining of the professionals in the securities markets.

Kamanzi also added that the objective for this meeting was to forge the integration of the capital markets in the EAC and create a conducive business environment that allows access to finance.

"With free movement of goods and services, regional businesses will invest in Rwanda,” said Kamanzi.

The harmonization will also avail Rwandans with the benefits of having more long-term products to invest with high returns which will promote the savings culture, a fundamental factor to the development of Rwanda’s capital markets and economic growth.

BNR slashes policy rate by 0.5 %

The Central Bank has lowered its key repo rate— the rate at which it lends to commercial banks by 0.5 percentage points from 7.5 percent to 7 percent to help local lenders to ease their borrowing costs.

The new rate, which will be effected at the beginning of the second quarter of this year, is expected to increase liquidity in the local banking system to help the economy recover from last year’s slow growth.

"The financial sector is recovering from a tight period after the liquidity problems in the entire sector but the lenders are still hesitant to give out loans,” François Kanimba, Governor of the National Bank of Rwanda (BNR) said.

He said that BNR’s decision was inspired by Rwanda’s macroeconomic growth with a low and stable inflation.

Rwanda’s inflation was in single digits throughout last year and it reached 2.46 percent, the lowest in 10 years. 
This is the second time BNR is revising its policy rate downwards this year. In January it implemented the 7 percent key lending rate from 9 percent which helped to lower the inter-bank trading rate and increased liquidity in the economy.

According to Sanjeev Anand, the Managing Director of Rwanda Commercial Bank (BCR), banks are unlikely to immediately reduce their interest.

As the BNR expects a decline in the cost of funds with sufficient liquidity it does not expect an immediate response from commercial banks.

"Banks don’t rush to change their interest rates; always have reasons for clients until they have confidence in the durability of decision taken,” Kanimba said.

Other measures that are expected to reduce costs of funds include the Credit Reference Bureau (CRB) which will capture and report the credit history of commercial banks’ clients to reduce non-performing loans.

The Central Bank through the monetary policy committee revises the ‘repo rate’ on a quarterly basis and takes a decision depending on the growth of the economy.

The Economic Partnership Agreement (EPA) between the East African Community (EAC) andthe European Union (EU) will be signed in December this year, John Bosco Kanyangoga, Rwanda’s trade expert has said.

The EPA deal, which was supposed to be sealed by end December 2007, is meant to bring less stringent trade rules and lesser tariffs on EAC exports to EU.

It would also replace the decolonization era trade system between the EU and the African, Caribbean and Pacific Group of States that expired in 2007.

"Both the EAC and EU have objectives that they want to realize by signing the EPAs and they will only sign if a compromise is reached,” Kanyangoga told Business Times in a phone interview.

He said that the two trading blocs agreed to push the deadline because they failed to reach a consensus on trade and development issues.

"The EPA mainly entails the trade matrix and the development matrix. EAC wants the EU to provide additional resources and support which is over and above what they are already providing through the European Development Fund (EDF), something that the EU does not agree,” Kanyangonga explained.

He added that through the EDF, the EU has been one of the major development agents in Africa, and that for this reason it feels that the development matrix in the EPA is being addressed by the EDF.

Stability in Rwanda’s foreign exchange reserves has kept the Rwandan Franc stable against the other foreign currencies, Central Bank Governor Francois Kanimba has said.

The Governor said on Wednesday that the franc has managed to appreciate against the US Dollar partly because of the confidence built among foreign investors and Rwandans in Diaspora due to the country’s political stability.

Rwanda’s forex reserves hold 6.2 months of imports of goods and services and currently stand at about $740m, Kanimba said.

"The gross official foreign reserves have been comfortable which explains stable macroeconomic as it is recovering from a balance of payments crisis last year,” he explained.

Despite the negative effect of the global economic recession on the external sector, Rwanda managed to record a positive balance of payment of $57.05m by end of 2009, driven by foreign capital inflows.

Kanimba hailed the government for the efforts to mobilize resources through budget support that contributed significantly to act as a buffer against emergencies.

According to the recent monetary policy statement by BNR, the Rwandan Franc recovered its stability since July. From December 2008 to December last year, it depreciated by only 2.82 percent.

The statement indicates that the relatively stable exchange rate of the Franc against the US Dollar reflects the sufficient level of foreign assets in the banking system compared to the prevailing demand for forex.

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