BNR Governor Rwangombwa gives update on the economy recovery fund

The Rwandan government, in response to the economic challenges posed by the global COVID-19 pandemic, established a 100 billion francs economy recovery fund. However, there has been a low uptake of the fund, leading to questions on its accessibility and effectiveness. CNBC Africa spoke with John Rwangombwa, the Governor of the National Bank of Rwanda, to shed light on the situation. The fund was designed to assist individuals and businesses facing short-term liquidity challenges amidst the crisis. Rwangombwa highlighted that banks in Rwanda had strong liquidity positions, reducing the need for the recovery fund. Furthermore, other short-term instruments like reverse repurchase agreements and government liquidity injections provided additional support. As a result, the banks did not face significant liquidity challenges and were able to meet loan requirements without tapping into the recovery fund significantly. The Governor revealed that less than 10 billion francs had been utilized from the fund, indicating a minimal demand from depositors. When questioned about the Economic Recovery Fund, allocated at 100 billion francs, Rwangombwa explained that the fund had two windows of support – one for the struggling hotel industry and another for businesses needing working capital. The uptake for the hotel window was around 43 billion francs, while the working capital window faced challenges due to information gaps and eligibility criteria. To address these issues, efforts were being made to educate bank officials and revise the criteria to make the fund more accessible. Proposed revisions include lowering the turnover reduction threshold from 50% to 30% and extending the comparison period beyond the first five months of the year. These changes aim to expedite the disbursement of funds and support more businesses in need. Additionally, Rwangombwa emphasized the importance of prudence during the pandemic, urging individuals and businesses to manage their resources wisely due to the uncertain duration of the crisis. With the persistence of the pandemic impacting savings and spending patterns, prudent financial management is vital to navigate through the uncertainty. Looking ahead, Rwangombwa echoed the Minister of Finance's projection of a 2% economic growth for Rwanda this year. While uncertainties remain, the government and the central bank are working towards supporting the economy's recovery and ensuring sustainable growth. As Rwanda continues to navigate the challenges posed by the pandemic, effective utilization of the recovery fund and prudent financial practices are crucial for economic resilience and stability.