The Rwandan franc, yesterday, fell sharply against the US dollar, hitting a nine-month low. Foreign exchange dealers attributed the fall to a shortage of dollars on the market.
By close of business yesterday, the central bank was buying dollars at 645.7/651.9, a significant rise from 639.7/652 by close of business on Friday.
Yesterday’s sharp decline followed weeks of sustained pressure against the local currency as supply of the greenback fell below market demand.
Foreign exchange bureau operators, whose principle source of dollars is the central bank through commercial banks, quoted the dollar at an average of 655/660, up from about 650/655 on Friday.
Some foreign exchange dealers told Business Times that commercial banks had not sold them dollars for the whole of last week. Under normal situations, banks are supposed to sell to forex bureau operators about $50,000 per week.
Dieudonne Bakunda, a treasury dealer at Rwanda Commercial Bank, said banks, too, were constrained due to limited supply of dollars from the central bank.
He said although the National Bank of Rwanda (BNR) had intervened on the supply side, last week, selling unspecified amount of dollars to commercial banks, the demand for the greenback was still high.
“For example, when a bank bids for, say, $4m, the central bank may sell only $500,000. So, as a bank we give priority to internal customers who want dollars to import goods,” he said.
He forecast the franc would hit the Rwf700 mark per dollar in the days ahead, “if the central bank does not come out in a big way to inject substantial amounts of dollars into the market.”
“Today the selling rate is at Rwf665 a dollar, tomorrow it might be at 668 or more. So the rate could go up to Rwf700 because, as a country, our imports are more than exports. So, if we are not exporting (that much), where are the dollars going to come from?” he wondered.
This is the second time in about nine months the often-stable Rwandan Franc is coming under immense pressure from the dollar.
In September last year, the franc, the most stable national currency in the East African region, depreciated at a rate of 2.7 per cent, year-on-year due to high demand for foreign exchange for the importation of capital goods.
During that time, Rwanda’s import bill had increased by $228m over the first half of 2012 compared with the same period the previous year. This increase, according to BNR, came against the backdrop of yet another 66.2 per cent rise of $137m between the first seven months of 2010 and the same period in 2011, causing high demand for the greenback.