Central Bank moves to contain inflation

Government through the National Bank of Rwanda (BNR) has increased the Key Repo Rate from 6 percent to 6.5 percent, in a bid to contain external pressure, mitigate inflation while ensuring economic growth. The key repo rate is the rate at which the Central Bank lends to commercial banks. The higher the rate, the more it is likely to reduce liquidity in the banking system. Central Bank Governor, Amb. Claver Gatete, said that the new development will maintain price stability and reduce inflation - the most important goal. There is strong evidence of the continuation of our growth with the economic growth likely to exceed the initial projections of 7 percent to 8.8 percent,” Gatete said. The sustained macroeconomic stability is attributed to the stimulus financing that has seen credit to private sector increase to 20.9 percent compared to 19 percent initially projected for the whole year. Credit is mainly concentrated in the sectors of commerce and hotels with 33.70 percent, which is the largest share of private sector credit, followed by the mortgage industry at 27.38 percent, transport and warehousing at 10.31 percent. Other areas include non-classified activities which carry 9.64 percent and manufacturing set at 9.28 percent. However, despite steady growth, inflation increased during the first eight months of 2011. Currently, inflation stands at 7.52 percent as of August while it is projected at 8.2 percent by the end of December. Major contributors of inflation are mainly food and non alcoholic beverages, which account for 3.63 percent , transport, 1.54 percent and education, 0.69 percent contributing to 80 percent of the August 2011 annual headline inflation. Theres also a need to look at the economy as a whole. We don’t stock food, nor trade but we give relevant information and respective ministries are able to act accordingly,” Gatete stated. The Governor disclosed that there were concerns about the possible fallout from crises in Europe, as well as sovereign debts in the US, high oil and international food prices and high inflation within the EAC. Ends

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Central Bank moves to contain inflation