Franc appreciates against regional currencies
The Rwandan franc gained substantially against regional currencies of Kenya, Uganda, Tanzania and Burundi in the first quarter of this year, projecting yet another growth in the country’s economy.
Despite the currency’s depreciation against the dollar, the franc gained by 2.8 per cent, 0.4 per cent, 0.3 per cent and 0.2 per cent against Kenya shilling, Tanzanian shilling, Ugandan shilling and Burundi franc respectively in the first quarter of this year.
But with increasing global food fluctuations and rising fuel prices, economists say the region needs to tighten its monetary policies to cushion any shocks, especially imported inflation
“We had to reinforce our team of researchers to really go deep and get information as much as possible and also for us to refine the tools we use in terms of implementing the monetary policy so that it is transmitted in the whole system,” Claver Gatete, Central bank Governor, said
Last year, the Rwandan Francs gained against the Tanzanian Shilling by 5.8 per cent, Kenyan Shilling by 2.0 percent, Uganda Shillings 3.9 percent while a Burundi franc was by 2.2 per cent.
The Central Bank attributes the franc’s stability to high growth; stable single digit inflation pushed by stability in the exchange rate.
“These performances were due to a high increase in net capital and financial transactions up from USD 499.36 in 2010 to USD 682.50 million in 2011 offsetting the persistent current account deficit,” he noted
John Gabo, a businessman, notes that the stability in the country’s currency is attracting more people, especially investors, in keeping their money in francs rather than converting them to dollars.
“When our money is strong we are able to trade freely without losing money in exchange rates,” he noted.
Moreover, improved payment systems and a conducive business environment, are the key drivers to trade and economic growth that saw a surplus of US$ 234.54 in the balance of payments up from US$ 72.07 million in 2010.
Economists are optimistic that the region’s economy is set to rebound with the recent ease in inflationary levels of the five member states which is estimated to surpass IMF’s projections in 2011 reduced the bloc’s growth by about 4 per cent.
Moreover, Uganda’s inflation eased to 21.2 per cent in March up from 25.4 per cent in February, Kenya slowed down by 01.1 points to 15.6 per cent from 16.7 per cent while Tanzania saw it reduced to 19.0 per cent up from 19.4 per cent. Burundi rose to 24.5 per cent from 22.0 per cent.
But with increasing global food fluctuations and rising fuel prices, economists say the region needs to tighten its monetary policies to cushion any shocks, especially imported inflation.
“All governors of central banks of the five countries have been communicating to make sure that is the problem in one country does not go to another, especially in speculation,” Gatete said
“In as much as we do our best, we could not have contained the situation in single digits… so we had to approach the government, with all the economic ministries, and agreed to see how they become part of the process and that why they took some fiscal measures like reducing fuel prices,” he added
Unlike its neighbours, Rwanda maintained its inflation levels in single digits which had made it possible to keep the economy afloat.
Contact email: Dias.nyesiga[at]newtimes.co.rw