Economy remains resilient despite global uncertainties – Central Bank’s Nsengiyumva

Last week, the National Bank of Rwanda (BNR) decided to keep its benchmark interest rate unchanged at 6.5 per cent, citing easing inflationary pressures and a cautious outlook on the current global trade policy shifts. The decision, according to the Central Bank, was reached following the quarterly Monetary Policy Committee (MPC) and Financial Stability Committee (FSC) meeting. In an exclusive interview with The New Times, Central Bank Deputy Governor Justin Nsengiyumva explained that the decision reflects a data-driven approach informed by both global and domestic indicators. ALSO READ: Central Bank explains decision to hold interest rate steady He pointed out that while inflation remains within the Central Bank’s target range of 2 per cent to 8 per cent, it is approaching the upper band at 6.7 per cent. Nsengiyumva argued that Rwanda’s exposure to recent global trade disruptions, including U.S. tariffs and rising geopolitical tensions, remains limited. However, indirect effects, particularly through imports from China, are being closely monitored. He also said that the Central Bank is currently exploring gold as a new reserve asset to diversify its portfolio and strengthen financial sovereignty in light of evolving global risks. ALSO READ: Rwanda to add gold to foreign reserves portfolio in next financial year Below are excerpts; Briefly take us through what informed the Central Bank’s decision to hold the key interest rate at 6.5 per cent. It’s a comprehensive process. We begin by analyzing global economic trends. Currently, global economic growth is projected to slow down, from a previously forecasted 3.3% to 2.8%. Similarly, sub-Saharan Africa's growth forecast has been revised from 4% to 3.8%. We also evaluate global price forecasts. As highlighted in our briefing, energy prices, covering petrol, gas, and oil, are expected to decline. We monitor international agricultural commodity prices and global inflation trends as well. On the domestic front, we look at Rwanda’s economic outlook. Our forecast shows inflation is likely to remain at around 6.5% in the coming year. Since our monetary policy framework is anchored on price stability, this inflation forecast plays a crucial role in determining our rate decisions. Considering these indicators, moderating inflation, falling energy prices, and uncertain global economic conditions, including geopolitical tensions and U.S. tariffs, we concluded that it was prudent to maintain the rate at 6.5%, while we continue to closely monitor future developments. Although inflation is easing, it's still near the upper band of your target range. How is the Central Bank managing this? Yes, at 6.7%, inflation is on the higher side, especially when compared to developed countries that target around 2%. However, for our context, we have set a realistic target range of 2% to 8%. Compared to Sub-Saharan Africa, where inflation is projected at 13%, down from 18%, Rwanda’s position at 6.5% remains relatively strong. Although we’re approaching the upper end of our target range, we believe current inflation levels do not warrant a rate hike. The global environment is still uncertain, and we prefer a cautious approach, monitoring expectations rather than reacting prematurely. Stability, at this point, means maintaining the policy rate. With global trade disruptions and U.S. tariffs, how is Rwanda being affected? So far, the direct impact has been minimal. Rwanda has limited exposure to the U.S. market. Our exports there are quite small. Even with the new tariffs, only about 0.2% of our total exports are affected, facing a 10% duty, up from zero, but it’s still minimal. How significant is the indirect risk? The indirect risk is more significant. We import around 37% of our goods from China, which is heavily impacted by U.S. tariffs. If production costs in China rise, this could translate into higher prices for goods we import, essentially importing inflation. However, we haven’t observed this effect materialize yet. The impact remains limited and mostly indirect at this stage. Where do you see the greatest external risk coming from? At the moment, the primary risk could come from China due to our high import volumes from there. While we do source some imports from Europe, we don’t expect that to pose a significant risk. Additionally, about 12% of our trade is within the region. Unless neighboring countries import inflation through higher-priced goods and services, we don’t foresee any major threat. That’s why our inflation forecast remains at 6.5%, stable and within target. Is this the same reassurance you're giving investors in the face of global uncertainty? Of course! While global disruptions understandably make investors cautious, the message we’re sending is clear: Rwanda’s economic fundamentals remain strong and our financial sector is stable. We're projecting economic growth of 7.1%, which will be supported by increased investment and innovation. The private sector continues to receive credit, and liquidity levels in our financial institutions are healthy. So, we’re saying to both domestic and international investors that Rwanda remains a safe and promising place to invest, despite global uncertainty. The Central Bank is considering gold as a reserve asset. What’s the rationale and current status of this initiative? This is a strategic move aimed at diversifying our reserves. Currently, we hold a mix of assets, including U.S. Treasury bills and central bank bonds. But given increasing geopolitical unpredictability, we want to include gold, which has proven to be one of the safest reserve assets over time. Over the last 20 years, gold has shown a consistent upward trend in value. Unlike other assets, it’s less vulnerable to political or economic shocks. It holds intrinsic value. So, the goal is both diversification and safeguarding financial sovereignty. We may store it domestically or in a secure foreign location. Where will the gold be sourced from? Gold must meet international standards, including a purity level of around 99.9%. We already have a certified refinery in Rwanda, so that’s an option. But we’re also open to sourcing from international markets, as long as the standards are met. How far along is this decision? The board has approved the decision. Now, management is in the implementation phase. We’re building the internal capacity required to manage gold reserves for the first time and consulting with other central banks experienced in this area. So, yes, it’s happening soon. Parting shot? Rwanda’s economy is fundamentally strong. We are growing faster than both the global and regional averages. Our financial sector is well-capitalized and has adequate liquidity. This gives us the confidence to continue supporting economic growth while monitoring global uncertainties.

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Economy remains resilient despite global uncertainties – Central Bank’s Nsengiyumva