Reactions to BNR’s monetary policy statement

The central bank last week released its half year report on the state of the economy amidst a turbulent regional and international economic situation. The bank said that exports increased by 58.2 per cent and 48 per cent in terms of volume and value respectively, which is expected to lead to a significant improvement in imports cover by exports currently standing at 21 per cent. The Governor of the National Bank of Rwanda, Claver Gatete, said that during the first half of 2011, the overall finance sector recorded positive growth due to significant improvement in competition brought about by entry of new players. Constance Mukayuhi, the Chairperson of the Budget and State Property Commission in the lower chamber of parliament, said that, to reduce the prices of sugar, which escalated tremendously from Rwf700 in May to Rwf1,200, parliament provided recommendations that both the government and private traders could follow. “Importing sugar that is free of tax is one of the assessments on board currently. Talks with the private sector are ongoing to see into ways of importing more sugar quantities so that by the end of the year, the price of sugar goes down,” she said. Government has since then capped sugar prices at Rwf800 per kilogram. Mukayuhi commented on the state of the customer care industry in the private sector, saying that it is still lagging behind. “Customer care is a very important priority if businesses are to grow; therefore banks have to improve their connectivity for people to save time at banks.” Maria Murekatete, a business woman said that interest rates on loans are high and discourage businessmen from acquiring loans. “We have been grouped in cooperatives so that banks can give us loans. This has improved our businesses and increased productivity; repaying the loans is not as hard as it was before when there were no or few cooperatives,” Murekatete told the Business Times. As a result banks continued to clean up their loan books. The central banks stated that banks recorded a reduction in non-performing loans ratio during the first half of 2011 from 10.8 per cent in December 2010 to 9.2 per cent in June 2011, and from 12 per cent in June of the last year to 6.6 per cent in June 2011. On the issue of revenue collection, the Commissioner of RRA, Ben Kagarama, said that the government implemented a number of reforms to improve collections without hurting taxpayers in an economy characterised by high prices. “Government has constantly reviewed laws and procedures to facilitate business, including the drastic reduction of penalties from as high as 200 per cent to 50 per cent,” Kagarama said. “RRA regularly sensitises businesses on how to avoid errors that attract penalties and even accommodates self-rectification if errors are discovered before the final audit.” He said that although it is not a government policy to control prices in a liberal economy, it intervened to subsidise with taxes in order to normalise prices of sensitive products like fuel and sugar. “Despite speculative tendencies by some traders, it is expected that prices for those products will reduce and stabilise again.” However, the real estate sector was not affected due to a major shortage of commercial and residential housing supply, as explained by Charles Haba, the President of Real Estate Association of Rwanda. “Real estate developers in Rwanda were not affected by the regional and global economic changes because their supply is still very low and yet demand for housing is very high,” Haba said. “The major challenge facing the real estate sector remains the cost for capital, whereby loan interests are still high yet we rely mostly on expensive imported building materials.” “Government would be very helpful if it mitigated the cost of infrastructure and also offered incentives to real estate developers for the sector to grow,” Haba said. Ends

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Reactions to BNR’s monetary policy statement