The National Bank of Rwanda has maintained its lending rate at 5%, a policy move designed to encourage commercial banks to continue lending to private businesses.
The central bank’s said today after the quarterly Monetary Policy Committee meeting that keeping the rate stable will “continue supporting the financing of the economy”.
In December last year, the lending rate was brought down from 6 percent to 5.5%. Then in May this year, the central bank again moved it down to the current level.
As a result, John Rwangombwa, the Governor, says bank credit to private sector increased 8.2% – compared to 1.8% rise in the same quarter last year.
New authorised loans increased 36.8 percent from a negative level of -3.3%, according to Rwangombwa, speaking at press conference.
By keeping the repo rate same a few weeks into the Government’s Rwf2.87tillion ($3.2bn) budget which has huge spending plans on mainly infrastructure, the central bank says it will continue helping the economy with “accommodative monetary policy and fiscal stmulus”.
Stimulus is the government’s way of saying it will not stop pouring money into the economy.
However, the central bank is faced with challenges such as the steady fall of the Rwandan franc against the US dollar. Barely 5 months ago, it was Rwf 900, – which is now Rwf 913, even more in some banks.
Inflation is expected to rise to 2% from 1.6, which essentially means that prices of essential goods will continue to rise.
The central bank also said today that shocks will come from the “intensified US-china trade tensions and prolonged uncertainties around Brexit”.