Rwanda’s central bank has maintained its lending rate to tackle soaring inflationary pressures and support economic recovery.
The central bank’s rate-setting Monetary Policy Committee (MPC) on Thursday decided to maintain the rate at 5 %, unchanged from the last quarter, in a bid to contain inflation and support economic recovery amid heightened risk including rising domestic and global inflation.
The projected international commodity prices are expected to be the main drivers of high inflation. The committee noted that these inflationary pressures surrounded by global uncertainties such as the Russia- Ukraine war, may negatively weigh domestic and global demand.
“The MPC…will continue to monitor the situation closely, standing ready to take further action, as necessary,” National Bank of Rwanda Governor John Rwangombwa.
Despite a recent uptick in inflation which is expected to rise sharply to 8 per cent, above the initial projection of 5 per cent in 2022, the Rwandan economy is on a steady rebound from a pandemic-induced recession.
The Composite Index of Economic Activities increased by 13.7 per cent year on year in the first quarter of this year from 11.9 per cent recorded in the first quarter of last year.
The National Bank of Rwanda attributes the strong rebound in the first quarter to the government’s successful Covid-19 vaccination campaign and various government policies, including the multimillion-dollar economy recovery fund and NBR’s accommodative monetary policy that supported the improvement of economic activities in the first quarter of 2022.
In recent months, the country has successfully reopened key sectors of the economy, including the tourism and hospitality sectors.
Rwanda’s economy is projected to expand by 7 per cent in 2022, slightly below the anticipated 10.2 per cent in 2021, according to the latest International Monetary Fund (IMF).