Rwanda’s Central Bank set to hold first MPC meeting of the year

Rwanda’s Central Bank recently held its first Monetary Policy Committee (MPC) meeting of the year to review the country’s economic performance. CNBC Africa spoke with Kevin Karobia, Senior Investment Analyst at BK Capital, ahead of the MPC to discuss likely market expectations. The primary expectation was that the central bank would maintain the MPC or the central bank rate at 7.5 percent. This decision was influenced by the need to remain competitive within the East African Community (EAC) as neighboring countries have also kept their rates relatively high. The main focus of the MPC is to ensure price stability and keep inflation within the target range of two to eight percent. Fortunately, Rwanda's current inflation rate stands at five percent, signaling positive economic stability for the second consecutive month. Considering global uncertainties and geopolitical tensions, the MPC decided to maintain the CBR at 7.5 percent. Karobia highlighted strong and stable economic growth in Rwanda despite the tight monetary policy environment. GDP growth remained robust, although the services sector experienced a slight decrease in growth, primarily driven by the trade sector. However, the industrial sector, particularly mining, saw significant growth, leading to increased exports and supporting overall economic growth. The discussion around tightening the monetary policy will revolve around its potential impact on economic growth, especially in the services sector, which is crucial to Rwanda's economy. The decision to maintain the current rate signifies a balance between supporting growth and ensuring currency stability. One key concern raised during the interview was the comparison of regional economies like Kenya, which recently hiked its rate, and Uganda, which retained its rate. Rwanda is examining fundamental issues such as currency performance and correcting deficits in the balance of payments to attract more investments. Karobia emphasized the importance of improving investor sentiment and adopting investor-friendly practices to enhance Rwanda's market appeal. In conclusion, Rwanda's Central Bank's decision to maintain the MPC rate at 7.5 percent reflects a cautious approach to balancing economic growth and stability amidst global uncertainties and regional economic developments. By focusing on price stability, supporting key sectors like mining, and enhancing investor sentiments, Rwanda aims to attract more domestic and international investments for sustainable economic growth.