Central bank projects inflation to reach 8.7 %

Central bank has projected a drastic increase in inflation by the end of this year as the turbulent global economic situation appears to take its toll on the Rwandan economy. The bank’s Governor, Claver Gatete, expects to contain inflation in single digits by the end of the year.   The bank’s forecasts suggest inflation rate prices will hover between 8.1 per cent and 8.7 per cent by December 2011 up from 7.5 per cent in August, which threatens to slow down the country’s GDP growth.
Central bank could be forced to review economic growth targets amidst high inflation. The New Times / File photo
Central bank could be forced to review economic growth targets amidst high inflation. The New Times / File photo

Central bank has projected a drastic increase in inflation by the end of this year as the turbulent global economic situation appears to take its toll on the Rwandan economy.

The bank’s Governor, Claver Gatete, expects to contain inflation in single digits by the end of the year. 

The bank’s forecasts suggest inflation rate prices will hover between 8.1 per cent and 8.7 per cent by December 2011 up from 7.5 per cent in August, which threatens to slow down the country’s GDP growth.

In December 2010, Rwanda’s annual inflation rate stood at 0.23 per cent before rising to 4.11 per cent in March 2011 and 7.52 per cent in August. However, Rwanda has the lowest inflation rate in the region compared to Uganda which stood at 21.4 per cent in August, Kenya, at 16.7 per cent and Tanzania at 14.1 per cent.

 “Current debt crisis in EU and US may have a negative impact on the Rwandan economy like in other African countries through multiple channels, including  external trade, capital flows, remittances, tourism and foreign aid,” Gatete said.

The Governor notes that this has been worsened by risks of higher imported inflation that rose from 8.65 per cent in June this year to 10.36 per cent August brought about by dependence on imported goods.

Rwanda’s import bill stood at Rwf9 billion in the period under review compared to Rwf5 billion of exports.

Clifford Sacks, the Executive Officer for Africa Renaissance Group, is optimistic that the global slowdown will have a great impact in great economies but less affect on African economies due to potential investment opportunities on the continent.

“There will be less money but that money will be going to fewer economies like Africa because this is where investment opportunities are,” he said during the regional East African Investment conference held in Kigali yesterday. The conference organised by Renaissance, a world investment group, is aimed at bridging investors and companies in East Africa in capital markets investments.

Charles Robertson, the Global Chief Economist and Head of Macro-Strategy at Renaissance Group notes that there are expectations that Africa woul benefit more than ever in these years despite constant shocks as its debt is amongst the lowest in the world.

“The workforce is better educated than ever, the cost advantage has improved and technology allows countries to leapfrog investment.”

Sacks noted that Renaissance is investing in building cities across the continent to contain the projected growing population in Africa that is expected to increase by 500 million in 2050 adding that the process to build a satellite city in Rwanda are under way.

He also noted that Rwanda is yet to attract more investments than the counterparts in the region due to its improvement in technology, cleanliness and business reforms that increase the investor confidence.

Adeniyi Ojo, chief Finance Officer at SONARWA, said that Renaissance’s initiatives will help Rwandan Companies to float shares on the capital markets for the public to increase their operational capital.

“We can grow our economy as a country if we ask the public to invest in shares because it is a long term investment and this is a good opportunity for the region”, he said

He added that Renaissance Group will increase on investment in the capital markets by attracting investors to the country’s growing sector.

Ends

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