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Rwanda continues to subvert the IMF's expectations

Kigali, Rwanda
  • Despite pressure from the IMF, the National Bank of Rwanda maintains its central bank rate (CBR) at 7% to address inflationary pressures. 
  • Rwanda's inflation is gradually easing, with a decline from 21.7% in November to 17.8% in April, nearing the National Bank's target range of 2-8%. 
  • The projected easing of inflation is based on expected declines in energy and fresh food prices, along with improved performance in the agriculture sector, although weather-related challenges pose potential risks.

The International Monetary Fund (IMF) has pushed for tighter monetary policy to reduce inflationary pressures in Rwanda’s economy, but the National Bank of Rwanda (NBR) has maintained its central bank rate (CBR) at 7%.

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The country's inflation has started to ease, and according to John Rwangombwa, governor of the central bank and chair of the rate-setting Monetary Policy Committee (MPC), it will soon reach the NBR's target range of two to eight percent.

“Analysis indicates the inflationary pressures are on a declining trend, although still high. Based on the projected ease, the MPC decided to maintain the CBR at 7 percent,” he said.

“Energy and fresh food inflation are projected to decline. The outlook assumes improved performance of the agriculture sector for the second half of the year,” the governor said noting that risks could arise from weather-related challenges.

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From a peak of 21.7% in November of last year, Rwanda's headline inflation declined to 17.8%in April, the lowest level in seven months.

The policy rate was raised by 50 basis points to 7% from 6.50% in November by the MPC, which determines the CBR every three months. This was the fourth rate rise in as many months.

The Central Bank of Rwanda increased its benchmark interest rate in February from 6.5% to 7.0%. Inflation pressures, which reached 20.7% in January, were predicted to persist in the short term before falling to around 8% by the end of the year, according to the National Bank of Rwanda.

According to the bank, the war in Ukraine increased commodity costs last year, which led to a jump in average headline inflation to 13.9% in 2022 from 0.8% the year before.

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