Europe’s sovereign debt crisis less likely to impact economy – Central Bank

The National Bank of Rwanda (BNR) has said the Rwandan franc is expected to remain stable against all major currencies, despite mounting fears of Europe’s sovereign debt contagion in the global market. Early last week, the value of euro-the official currency of the European Union was under pressure falling slightly due to increased market speculation of bailouts for Portugal after Ireland. According to Ambassador Claver Gatete, the Vice Governor of the Central Bank, no major impact is expected on the economy as a result of euro zone crisis as its share of trade with the country is relatively low at 20 percent. Adding that: “We could be worried if it went below the amount we had in June when it trading at Rwf 713,” Gatete told Business Times on Thursday. Figures from the Central Bank show a depreciation trend of exchange rate between franc and euro hit a record low in June at Rwf713, before taking an appreciating trend from July at Rwf752. Currently it is trading at Rwf778. “It has not gone to a level where we could be concerned,”Gatete said. However, the Vice Governor observed that while the bank monitors all major trading currencies, more attention is given to the American currency as to which the national reserves are stored. “All our reserves are in US dollars; either way we are not affected in this kind of situation,” he explained. Official figures from the Central Bank indicate that the franc regained its strength from trading at Rwf588.58 by end of June this year to Rwf592.12 per dollar currently. According to the central bank ,the country has sufficient reserves more than 6 months of imports , well above the International Monetary Fund(IMF) target of 4 months.“This means if there is any situation we as central bank can intervene; this means we do not have any risk,” he said. With the new electronic foreign exchange trading system used at the Central Bank, Gatete said this will allow the bank to easily monitor currency trading and other financial transactions. He said this has enhanced operations making the market more flexible with real exchange rate of the Rwandan Franc. While the Franc appreciated significantly against the euro and regional currencies in the first quarter of this year, in the second quarter, the Central Bank accommodated a depreciation of 3 percent vis-à-vis the US Dollar to offset the effect of its appreciation on exports competitiveness. Ends