The National Bank of Rwanda (BNR) has slashed its key repo rate at which it lends to commercial banks, by one percentage point, from 7 percent to a record low of 6 percent.

François Kanimba, the Governor of the central bank, said cutting the rate is the only way to encourage banks’ lending to private sector and to boost economic growth.

"Compared to last year we have recorded a growth of about 50 percent in volumes of new loans; though it is quite significant, the impact in terms of total outstanding credit to the economy ha not been high as expected,” Kanimba said, yesterday, while announcing the new rates during a press conference at the Bank’s premises.

"The liquidity in the banking system is comfortable and reducing key repo rate sets a very important signal to the market,” he said, describing the new rates as the lowest since he joined the central bank.

The Governor noted that in the third quota of 2010, the new loans, issued by the commercial banks for the first time, have reached Rwf70.8 billion compared to about Rwf69 billion and Rwf52.6 in the second and first quotas, respectively.

Credit growth is projected at 10 percent by end 2010, below the initial forecast of 20 percent as a result of the enhanced risk management practices and loan recovery processes by banks.

He said the growth is associated with low inflation pressure with Inflation that reached 0.14 percent in October.
This is the second time the central bank is lowering its policy rate downwards this year.

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