BNR banks on research to control external shock

The National Bank of Rwanda (BNR) has tied hopes on research based policies to control the spillover effects of a volatile global economic situation, which threatens to hurt the future of developing economies. Claver Gatete, the Governor of BNR told Business Times last week that laying foundations for a solid networking in policy analysis and research by all stakeholders is the key to shielding the country’s economy from global economic shocks. Rwanda like other developing countries is challenged in finding accurate policies to keep its economy afloat in the wake of high global food and fuel prices coupled with the eurozone debt crisis as well as fiscal problems in the US. “…addressing the consequences of the current turmoil in the global economy remains a headache for many countries and regions where there is a lack of coordinated policy analysis and action implementation,” he said. Although it has the lowest inflation in the region, Rwanda also faces risks of high inflationary pressures, particularly from imported inflation. The Governor says that in order to attain tangible results in sustained economic development and address the challenges, stakeholders should continue working together to mitigate any spillover effects. Economists warn that despite a promising economic outlook, the economy may still be vulnerable to yet another anticipated external risk, culminating from the current global shocks that may affect foreign aid flow and increase imported inflation. Moreover, Gatete notes that with a stable currency and improvement in all productive sectors of the economy, which has led to an increase in aggregate supply, the economy is set to stand firm against these shocks. Central bank has maintained a tight monetary policy after it twice raised its key repo rate this year, a move experts said would increase borrowing costs and limit the flow of credit into the economy. The move was aimed at controlling inflation, which rose to 7.72 per cent in October this year, up from 0.32 in December last year. Johannes Zutt, the World Bank’s Country Director for Rwanda gave a nod to the central bank’s policy stance, saying that it would maintain inflation in single digits. Experts say that the Treasury’s fiscal move to reduce fuel taxes, slashing sugar prices and financing additional sugar imports in case of supply shortage among others has helped to keep the economy stable. Antonia Mutoro, the Executive Director at the Institute of Policy Analysis and Research in Rwanda-(IPAR) said that there is need to ensure that policies made translate into actions to improve the lives of ordinary Rwandans. “Our major milestone is to improve evidence based decision making and local ownership of policies in our country by engaging our stakeholders at all levels of our research,” she said during a three day research dialogue aimed at addressing key areas of public policy that impact lives of ordinary people. Rwanda’s inflation rate is projected between 8 and 8.7 per cent by the end of the year while the economy is expected to grow by 8.8 per cent dias.nyesiga@newtimes.co.rw