Senate summons central bank governor over weakening franc

Finance Minister John Rwangombwa and the Governor of the Central Bank, Claver Gatete, this Wednesday appeared before the upper chamber of Parliament to explain matters to do with the performance of the franc against major currencies.As of yesterday, central bank rates indicated the USD was selling at Rwf635 and buying at Rwf624. “Inflation is currently at 5.4 percent, which is not a bad situation,” Gatete told Senators, hastening to add that controlling inflation amidst economic growth does not come easy.The franc depreciated by 1.3 percent against the dollar in the first half of this year, selling at Rwf612.43 compared to Rwf604.14 during the same period last year. “When investors heard that donors were cutting aid, they rushed to buy and stock as much foreign exchange as they could...this speculation was bad and it created problems,” Gatete, who was flanked by Rwangombwa, told the Senate.He cited increased demand for capital goods as another cause for depreciation of the franc, singling out intermediary goods like fertilisers, which he said had increased by 31 percent.Minister Rwangombwa told the house that the fact that the country has stable interest rates, little inflation and that there is no liquidity problems was testimony of macroeconomic stability.The minister attributed the high cost of food in the country to the cost of production and said the crop intensification programme adopted by the government 4 years ago aims to solve the problem.“What we are telling you are not theories…this is a reality. 1.2 million people have jumped out of abject poverty….but that another 4.5 million are in extreme poverty is a matter to take serious,” he stressed. “People are complaining about bank charges, especially those in the Diaspora,” Senator Bizimana Jean Damascene said.Gatete said no modern central bank should regulate fees on money transfers by financial institutions. He noted that overall performance of the financial sector has improved but banks are yet to secure long-term lines of credit to avail long-term financing.The central bank has since 2011 injected US$327.8 million into the foreign exchange market to control the escalating scarcity of the US dollar.