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BNR Governor Rwangombwa: Why Rwanda’s Central Bank kept repo rate unchanged
After review from the country’s monetary policy meeting, Rwanda’s Central Bank has maintained the repo rate at 4.5 per cent as the country’s economy starts to bounce back from the shocks of the COVID-19 pandemic, CNBC Africa’s Arnold Kwizera spoke to the Central Bank Governor, John Rwangombwa for more.
Fri, 14 Aug 2020 10:53:20 GMT
Disclaimer: The following content is generated automatically by a GPT AI and may not be accurate. To verify the details, please watch the video
AI Generated Summary
- The Central Bank's decision to keep the repo rate at 4.5% is aimed at supporting the financing of the private sector amidst the challenges posed by the COVID-19 pandemic.
- Various measures, including lowering the reserve requirement ratio, increased government spending, and the establishment of an economic recovery fund, have been implemented to ensure liquidity in the market.
- While there are concerns about commercial banks' lending behavior, Governor Rwangombwa explained that the reduction in new lending was primarily due to low demand during the pandemic's initial phase.
- The Central Bank and the government are closely monitoring businesses, especially those in sectors like tourism and hospitality, to provide support and facilitate their recovery as loan repayment grace periods expire.
Rwanda's Central Bank has decided to maintain the repo rate at 4.5% after a recent monetary policy meeting, as the country's economy shows signs of recovery from the impact of the COVID-19 pandemic. In an interview with CNBC Africa, Central Bank Governor John Rwangombwa explained that the decision to keep the rate unchanged was aimed at supporting the financing of the private sector, which has been facing challenges due to the pandemic. Despite inflation slightly exceeding the upper limit of 5% in the second quarter of the year, the Central Bank expects it to decrease and thus felt comfortable maintaining an accommodative monetary policy.
Governor Rwangombwa highlighted that in addition to keeping the repo rate unchanged, the Central Bank had implemented various measures to ensure liquidity in the market. These included lowering the reserve requirement ratio for commercial banks, increased government spending, and the establishment of an economic recovery fund. These initiatives injected liquidity into the financial sector and supported businesses during the economic downturn.
However, there have been concerns raised by consumers regarding commercial banks' reluctance to expand their loan books despite the Central Bank's efforts to enhance liquidity. Governor Rwangombwa addressed these concerns by emphasizing that while new lending had reduced by around 10%, it was still higher compared to previous years. He noted that the slowdown in lending was primarily due to a lack of demand from borrowers during the initial phase of the pandemic but expected an increase in demand as economic activities picked up.
Looking ahead, Governor Rwangombwa discussed the challenges faced by businesses, particularly in sectors like tourism and hospitality, as loan repayment grace periods were coming to an end. He acknowledged the need for continued support to help businesses recover and highlighted the government's ongoing efforts to assist struggling enterprises through measures such as the economic recovery fund.
In conclusion, Rwanda's Central Bank's decision to maintain the repo rate at 4.5% reflects its proactive stance in supporting the economy's recovery amidst the ongoing challenges posed by the COVID-19 pandemic. By implementing a mix of monetary and fiscal measures, the Central Bank aims to ensure adequate liquidity in the market and facilitate the financing of businesses to spur economic growth.
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