Lending rate remains at 7.5% – Rwangombwa

Rwanda’s Central Bank has made the decision to maintain its interest rate at 7.5 per cent for the second consecutive time, after adopting a stable stance since August last year. In an exclusive interview with CNBC Africa, the Governor of the National Bank of Rwanda, John Rwangombwa, discussed the rationale behind this decision and provided insights into the country's economic outlook. Despite calls for a reduction in the interest rate due to stabilized inflation rates, the Central Bank remains cautious and aims to ensure the sustainability of the economic stability seen in recent months. Governor Rwangombwa highlighted several key economic indicators that point towards a positive performance in the real economy. With a projected GDP growth of over 7 percent for 2023 and inflation levels stabilizing around 5 percent, Rwanda is poised for continued economic prosperity. However, the Governor acknowledged the presence of risks, including geopolitical tensions in the Middle East and climate change concerns, which necessitate a prudent approach to monetary policy. Looking ahead, the Governor hinted at the possibility of a policy rate reduction in the upcoming monetary policy round, contingent on the economic projections meeting expectations. The interview also touched on the impact of external factors, such as trade deficits and global economic uncertainties, on Rwanda's domestic economy. Governor Rwangombwa emphasized the importance of closely monitoring these variables and affirmed the Central Bank's commitment to supporting economic resilience and growth. The conversation then shifted towards the performance of the Rwandan franc and the financial sector. Despite challenges in the exports sector and currency depreciation, the Governor expressed confidence in the alignment of the currency's value with the country's economic fundamentals. He anticipated a stabilization of the Rwandan franc in the coming months, bolstering competitiveness and trade prospects for Rwanda. In terms of the financial sector, Governor Rwangombwa lauded its soundness and stability, with assets and lending activities showing positive growth trends. The insurance sector also reported underwriting profits for the first time, signaling a robust financial landscape. The Governor highlighted the significant progress made in digital payments and financial services, citing the drive towards a cashless economy as a key priority. The expansion of digital payment infrastructure and the increase in digital transactions signify Rwanda's commitment to enhancing financial inclusion and efficiency. Overall, Governor Rwangombwa's insights underscored Rwanda's resilience in the face of economic challenges and its proactive approach to sustaining growth and stability.