Rwanda : Is Rwandan economy really stable?

 The Central Bank of Rwanda has reassured Rwandans that despite unfavorable weather conditions which affected agriculture; and foreign aid cut, the country’s economy will continue to stand resilient and all economic projections will be met.

In its second monetary policy and financial stability statement of this year 2012, the Bank declared the financial system as “sound and stable”

According to the Central Bank Governor ‘Ambassador’ Claver Gatete, who headed the new financial stability statement presentation, the National Bank of Rwanda has been implementing a prudent monetary policy, while continuing to support the financing of the economy.

Consequently, the annual headline inflation decelerated to 5.92percent in June from 8.18percent in March 2012 and 8.34prcent in December 2011.

The new financial stability statement shows that the Rwandan financial sector stability continued to be sound and stable throughout the first semester 2012 and all sectors complemented each other in the national development. The banking sector, which dominates the Rwandan financial sector, demonstrated an increase in the balance sheet of 21.9percent.

With the Rwanda inflation rate at the end of June 2012 was at 5.9 and the country projection indicates it should not exceed 7.5 at the end of the year, we can say that the Rwandan financial institutions are doing well.

But is this progress found in the population’s everyday life? If so, there might be something that is making food prices higher, which many people ignore.

High prices’ complain on the market

Even though the Rwandan financial sector is stable and projections are being met, food prices on the market have been increasing and this is one of the inflation’s consequences. Rwanda is rated at 5.9percent and is well rated compared to other great lakes region countries. Kenya is on 10percent, Uganda 18percent, Burundi and Tanzania at 17percent.

Locally people are complaining that food prices have never stopped to increase, while authorities praise themselves for the national economy’s growth. The Kenyan High commissioner to Rwanda Makena Muchiri seems to share that concern.

She said “sometimes we, as government officials, tend to be satisfied with showing impressive figures which don’t reflect the reality on the field, and this can have negative consequences on our economic strategies”.

In response to that, the Rwanda Central Bank Governor, Ambassador Claver Gatete, said that one of the inflation’s explanations is the rise of prices, but also stated that all prices cannot increase at the same time.

“It’s true that prices increased. That is why we’ve been facing inflation. But all products and services prices cannot go high at the same time. Some go up while others go down and this is normal. What we do is to make it stable; it means not to exceed 10percent”.

Recently some countries that normally support the Rwanda national budget have suspended their financial support, after UN experts’ reported leak in which it is said Rwanda supports M23 Rebels against Democratic Republic of Congo government. The Rwandan government reaction was that this will never affect or slow down Rwanda’s economic growth.

This is what Ambassador Gatete reiterated to journalists after he closed the 2012 monetary policy and financial stability statement.

“The money that has been suspended is part of the budget support. But in terms of the resources that come here from outside, which can come in form of projects support or programs support, that has not been touched and at the same time the multilateral support of the budget has also not been touched. So the money we’re talking about is quite a very small amount of money. So, no one should worry”.

While the International Conference on Great Lakes Region summit which held in Kampala this week, has concluded with the formation of a sub-committee, which will come up recommendations to end the eastern DRC conflict before another heads of states discussion scheduled in four weeks,  the suspension of aid to Rwanda shall be removed.

Even if Rwandan government says it is very little, it might sound like a boost to the Rwandan finance, because the country’s relevant authorities did not declare that this aid is no longer needed.