Economy:BNR maintains tight monetary policy as inflation rises to 8.3%

Rwanda’s inflation increased to 8.34 per cent in December 2011 from 7.4 per cent the previous month, driven by an increase in the cost of housing, water, electricity, gas and other fuels, according to the National Institute of Statistics of Rwanda (NISR). The figures released yesterday come in the wake of the International Monetary Fund’s (IMF) projection that the country’s prices of goods and services could go up in 2012 due to uncertainties in the global economy. The IMF said last week that: “Growth is expected to slow in 2012, although risks from the Euro zone could bring lower growth and higher inflation. Structural reforms efforts will have to be stepped up to boost growth prospects.” The projection is contained in a report on the third review of Rwanda’s economic performance under the Policy Support Instrument (PSI) programme. The programme is designed for low-income countries that may not need IMF financial assistance but still seek close cooperation with the IMF in preparation and endorsement of policy frameworks. Central bank Governor, Claver Gatete, vowed to maintain a tight monetary policy stance in order check the rising inflation but says that most policy decisions will hinge on regional and global economic events. “We need to tighten our monetary policies but it will largely depend on the European Countries which are in a crisis at (the) moment,” he noted. The central bank increased the key repo rate to 7 per cent in November last year from 6.5 per cent and 6 per cent in November and October respectively. The central bank’s objective to maintain a tight monetary policy stance signals yet another tight year for borrowers who are expected to witness limited access to finance due to high interest rates. The central bank target an inflation rate of 7.5 per cent by the end of the year. The NISR said that the increase in consumer inflation in the month of December is mainly due to the rising prices of food and non alcoholic beverages, which increased by 11.22 per cent. While prices of ‘local goods’ increased by 8.26 per cent on annual change with a monthly change of -0.29 per cent, prices of the imported products increased by 8.63 per cent on annual change with a monthly change of 0.11 per cent. The IMF says that fiscal consolidation in FY2011/12 and FY2012/13 remains on track and is expected to further anchor macroeconomic stability. The central bank has predicted a low economic this year from a projected 8.8 per cent last year to a projection of 7.6 per cent. saul.butera@newtimes.co.rw