Governor Rwangombwa speaks on Rwanda’s economic & inflation outlook

Rwanda's economy has shown remarkable resilience and growth in the face of global challenges, with a growth rate of 7.7% in the first half of 2022, compared to 11.6% in the same period last year. In a recent interview with CNBC Africa, John Rwangombwa, the Governor of Rwanda's Central Bank, shed light on the country's economic performance and the persistent issue of high inflation. He highlighted the impressive performance of Rwanda's service sector, particularly in tourism-related services, which saw significant growth. The governor also lauded the mining and manufacturing industries for their strong performance, driven by high global prices of metals and exports of fortified food and semi-intermediate goods. However, the agriculture sector experienced a contraction, mainly due to adverse climatic conditions and increased fertilizer prices. The governor acknowledged the impact of inflation on the sector, but emphasized that it was more a cause than a victim of inflation. Despite challenges, Rwanda has been proactive in addressing the issues, with efforts to mobilize farmers and boost agricultural production. Inflation has been a major concern, with Rwanda ranking among the top 10 countries worldwide with high inflation rates. The governor attributed this to poor agricultural seasons and global food inflation. Measures have been taken to address the situation, including increased importation of fertilizers and mobilization of farmers for better upcoming seasons. Looking ahead, the central bank expects continued strong economic performance in the third and fourth quarters of 2022, with projected growth surpassing the initial estimate of 6%. Export earnings have also seen a notable increase, driven by higher international commodity prices and strong performance in traditional and non-traditional exports. However, the widening trade deficit poses short-term challenges, particularly in the foreign exchange market. Despite a slight depreciation in the national currency, the governor remains optimistic, citing efforts to boost exports and improve the country's trade balance. In response to inflation, the central bank has raised the policy rate twice this year, with the latest increase being the highest in 13 years. The governor confirmed that these adjustments have had an immediate impact on the interbank market rates, which have followed suit. While further tightening measures may be considered if inflation persists, the central bank remains committed to stabilizing prices within the target range of 2-3%. Overall, Governor Rwangombwa's insights reveal a proactive approach to addressing economic challenges and a positive outlook for Rwanda's economic future.