Rwanda's central bank says it has increased, by 50 percentage points, its lending rate to 7.5 per cent to strengthen its fight against the current inflationary pressures, among other things

Central Bank Governor John Rwangombwa, announced the decision on Thursday, August 17, during the release of the quarterly Monetary Policy Committee and Financial Stability Statement, a review of recent global and national economic developments as well as potential interventions.

Also known as the key repo rate, this is the fee at which the Central Bank lends to commercial banks. Adjusting it upwards or downwards allows the regulation of liquidity in the banking system with the aim to stabilise the economy.

The increase of the central bank rate Rwangombwa said, is expected to maintain this downward trend in inflation that we are seeing and at the end fall within the band (below 8 per cent) by the end of 2023 and around 5 per cent in 2024, even as he warned of unprecedented vulnerabilities such as climate shocks.

"The current forecast faces some uncertainty, such as the geopolitical tensions that could influence international commodity prices, as well as unpredictable events linked to climate change that continuously affect our agriculture sector performance."

In a related development, Rwangombwa noted that the external sector remains fairly the same with a bigger import bill, a gap that has also triggered pressures on the exchange markets.

"Our imports have grown much bigger than the export earnings and it is coming from a bigger base as a result the deficit has widened, and that has put pressures on the exchange market."