High demand for dollars from oil dealers; importers weigh down Rwandan Franc

The poor performance of the Rwanda Franc against the US Dollar over the past few months has been attributed to high demand for the greenback by importers and oil dealers. “There is a lot of demand for the US Dollar, which could not be matched by the central bank’s intervention or by the amounts commercial banks sell to forex traders as more importers were buying the greenback to import consumables for the festive season,” Riyaz Naghoor, the head of operations at UAExchange Rwanda, said. UAExchange was selling the dollar at Rwf710, yesterday, compared to Rwf705 at the start of the month, indicating a depreciation of about Rwf5. The central bank quoted the local unit at 686/700 (buying and selling) yesterday. “Petroleum companies in Rwanda are transferring millions of dollars on weekly basis to pay their suppliers in other countries,” Naghoor added. Naghoor noted that since Rwanda is not a manufacturing country, the demand from importers is the main factor behind the depreciation of the local unit. The franc has depreciated by 3.6 per cent against the dollar this year going by National Bank of Rwanda’s (BNR) figures, having gone down from trading at a middle rate of Rwf669.4 on December 24, last year, to Rwf693.7 yesterday. The depreciation is, however, lower compared to last year, where the franc depreciated by 6.1 per cent against the dollar. “The current demand is not alarming. “It’s the usual end-of-year driven demand by traders, where people are importing more while exports are subdued. We hope the situation will start stabilising at the beginning of next year,” said Carine Umutoni, the head of treasury at Bank of Kigali. Umutoni said towards the end of the year, individuals and traders usually spent a lot of hard currency on Christmas and New Year festivities’ items. “However, we expect export revenue to start peaking around January or February, which will support the local currency,” Umutoni said. In the region, depreciation of the franc this year remains the lowest, with the Kenya shilling depreciating by 5.9 per cent, the Uganda shilling by 10 per cent, while the Tanzania shilling shed 8.4 per cent, according to data from regional central banks. Rwanda’s trade deficit widened by 14.9 per cent, to $1,211.24 million in the first eight months of 2014, from $1,053.83 million of 2013 during the same period last year, according to statistics from National Bank of Rwanda. This was attributed to the increase in imports which went up by 11.1 per cent in value and 1.3 per cent in volumes compared to exports that grew marginally by 0.8 per cent over the reporting period. business@newtimes.co.rw

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High demand for dollars from oil dealers; importers weigh down Rwandan Franc