Rwanda: High Imports Affect Franc

Kigali — An acute increase in Rwanda's import volumes has left the Franc, the country's currency down in value at the rate of more than 2%.

Between December 2011 and June 28, 2012, the Franc depreciated by 1.4 %.

On the money market here, importers have been buying a single dollar at almost RWF650; the lowest the franc has sunk in almost three years.

Mr. Claver Gatete, Governor of the Rwanda National Bank (BNR), attributed the situation to high volumes of imports into the country adding that it is good news for the economy as it indicates investor confidence.

According to fresh figures from BNR, the volume of imports into the country grew at an astonishing 25.6% between July and August this year.

Between July 2011 and July 2012, imports, according to BNR's half year report, indicate had increased by 66 per cent.

"The positive point here is that we are talking about capital goods being imported an indicator that the economy is health because investors are willing to invest," explained Gatete.

Though BNR says the country registers higher imports during this time of the year, Governor Gatete admits the figures are overwhelming.

In fact, the Central Bank has pumped $375.6million of dollars in the market to mitigate the scarcity of the greenback which has caused anxiety among importers.

"We suspect somebody might be playing dirty, hiding dollars," lamented Mr. Isaac Mukubu, an importer of phones from Dubai.

During a press conference held Tuesday last week, the governor admitted that they too suspect possible malpractice in form speculating dealers.

"We have met with all Banks' heads and the licensed players in the Forex bureaus to discuss the situation and as authorities, we shall arrest all unauthorized dears in the financial market who could be engaging in malpractice," warned Gatete.

Despite high imports, BNR reports that imported inflation has remained largely low at 1.2%.

But this could be because consumption of the finished items made using the imported materials is not immediate.

Take for instance housing. According to Gatete, at 75% of the cement in the country is imported a factor which obviously impacts on the final cost of a finished house.

As it's, the lowest price one can buy a decent house in a planned estate in Rwanda is, according to developers, between 60 and 100 million francs, money only a hand full of Rwandans can manage.

The low imported inflation could also be attributed to the largely declining inflation rates in the region such as Uganda where most of the Cement into Rwanda comes from.

However, besides the wild import receipts, other sectors of Rwanda's economy seem to be ok at least according to new figures released last week.

For instance, regarding external trade, the value of exports has increased by 22.6% from a volume of 74.3% thanks to minerals which enjoyed higher prices at the international market.

56% of the total exports' volume was from coffee while 44% was from non-traditional exports.

Flavored and non flavored tea, raw hides of bovine, roasted and non roasted coffee, bars and rods of iron, vegetables and beer remain Rwanda's main exports to the EAC.

But it heavily imports sugar, cement, fertilizers and clothing reducing the BOP drastically.

In the period between January and August this year, Rwanda's exports have been able to cover only 20.9% of the value of imports still so low despite having grown slightly from 19.6% (for the same period last year).

On the other hand, informal trade seems to be thriving without a hindrance with available figures showing that the sector brought in US$59.40 million in the first seven months of 2012 compared to the same period in 2011.

Concerning general commodity prices, headline inflation on annual basis stood at 5.81% from 5.57% in July.

The Central Bank also announced last week it will maintain its key repo at 7.5% a measure which will see a steady growth in credit to the private sector which increased by 18 per cent with authorized loans reaching Rwf237.3 billion in the first six months of this year, up from Rwf140.7 billion in same period last year.

Based on the booming sectors in the economy, Governor Gatete believes the economy may well surpass its projected growth of 7.7%. This is despite the fact that the Euro is taking long to recover which might force IMF to revise its global growth projections slightly lower than their 3.5% estimations.

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