Since late July, the Rwanda franc has been losing value to the US dollar and other major currencies. It all started when the local unit hit a nine month low of 655/660 on July 21. Since then, the situation has only gotten worse, with the franc depreciating by the day. The local unit was yesterday quoted by commercial banks and forex bureaus at a high of 650.8/694.3 (buying/selling) to the US dollar, down from 649.9/694.5 on Monday.
The National Bank of Rwanda quoted the local currency at 658.4/664.6 to the US dollar, down from 657.4/663.6, on Monday, compared to 617.8/627.7 on September 28, 2012.
The central bank argues that the local currency is usually expected to depreciate around this time of the year and is sort of resigned about the issue. Yet it admits that this year the local currency has taken much more of a beating (it has shed 3.9 per cent so far) compared to previous years.
The state of affairs raises questions. Isn’t it only natural that BNR would have planned ahead to ease the impact on the local unit if they are aware that the franc is most volatile against major currencies around this time of the year? Where does all this leave local businesses? Will they weather the tide without getting bruised?
Experts could argue that a weak franc is good news for exporters, but how many products do we ship out of the country to earn foreign exchange? And for an import economy, things could only get worse. Surely, the central bank can do better as a weak franc hurts many sectors of the economy, and the ordinary Rwandan is hit hardest.
The central bank should urgently work with other stakeholders and find ways to reduce the franc volatility in the second half of the year.