High inflation has had a negative impact on Rwanda's economy. It has depressed household budgets, devalued the Rwandan franc in part, and exerted immense pressure on companies, some of which are already reporting that their profit margins have been pressed.Headline inflation, a key metric which tracks the average change in prices for a basket of goods and services that a typical household consumes, hit 20.7 per cent in January of 2023.
"This has eased since central banks took decisions to tighten their monetary policies. That tied financial conditions slowed down economic performance, slowed down global demand, and that slowed down global inflation," John Rwangombwa, the Governor of the National Bank of Rwanda toldThe Central Bank has managed to bring back inflation within its target range of 2-8 per cent. Headline inflation dropped to 4.9 per cent year-on-year in February this year from 20.
Some of those risks include geopolitical tensions such as the war in Ukraine, Red Sea disruptions, global oil cuts, and climate change. These risks could potentially lead to inflation hikes, and worsen the local currency which lost 18 per cent of its value against the US dollar last year. In November when the Central Bank held its key lending rate at 7.5 per cent, it was hoping the decision would bring back inflation within its targeted range of 2-8 per cent.The Central Bank says the economy will continue to maintain the growth momentum seen in 2023 provided that major risks subside. This would put the growth rate for 2024 at 6.6 per cent.
She added,"The World Bank encourages the country to pursue its prudent fiscal management by reducing non-essential spending and prioritizing investment in human capital."There was a problem processing your submission. Please try again later.