Aid Cuts Hurt Rwanda's Economic Growth Projections

capsule buy geneva; font-size: small; line-height: 200%;”>The National Bank of Rwanda (NBR) governor, viagra John Rwangombwa, said the Rwandan economy in 2013 evolved in a challenging environment marked by, among other things, a lagged impact of the mid-2012 cuts in donor support, which were reflected in reduced government expenditure in 2013.

He made the remarks during ordinary meetings between the Monetary Policy Committee (MPC) and the Financial Stability Committee (FSC) of BNR to assess the monetary policy implementation for the first quarter 2014 and to review the financial sector performance to decide the way forward on the policy orientation.

The FSC observed that the financial sector remains well performing and stable as it continues to be resilient to adverse changes as a result of adequate capitalization of financial institutions (Capital Adequacy Ratio of 23.1 percent for banks, 33.4 percent for microfinance institutions and solvency ratio of 221 percent for insurance companies) and adequate liquidity (49.6 percent for banks, 80.5 percent for microfinance institutions and quick ratio of 278 percent for insurance sector) as of end December 2013.

Rwangombwa said the main contributing factors to the prevailing stability of the sector have been the strong regulatory framework in place, coupled with adequate supervision through continuous off-site and on-site inspections performed by BNR, as well as regular prudential meetings.

Contrary to previous years, the annual real GDP growth has been quite moderate.


“Nevertheless, the economic performance is expected to progressively recover, increasing to around 6.0 percent in real terms in 2014, on account of improved aggregate demand,” said Rwangombwa.

“The BNR accommodative monetary policy stance currently implemented since June 2013 significantly contributed to increasing the financing to private sector, while inflation was kept low.”

He said a result of reducing the Key Repo Rate (KRR), credit to private sector has been significantly increasing on monthly basis.

On the foreign exchange market, the BNR boss further said the FRW has had a slight depreciation of 1.0 percent as of 24th March 2014 compared to end December 2013.

Global stability in the exchange rate is expected in the second quarter of 2014, on account of increase in foreign exchange inflows.

In view of the above developments and in order to sustain current positive trend in credit to the private sector thus supporting the expected economic growth recovery, said Rwangombwa, the MPC decided to maintain the BNR accommodative monetary policy stance by keeping the KRR at 7.0 percent.

However, though the credit expansion so far observed is expected not to jeopardize price stability in the near term, the BNR will continue to closely monitor developments in all underlying factors of inflation so as to take timely and appropriate policy responses.

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