Central Bank optimistic as currency market stabilizes

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 John Rwangombwa: Governor National Bank of Rwanda.

John Rwangombwa: Governor National Bank of Rwanda.

The money market that faced volatility pushing exchange rates higher since February, 2015 has shown signs of stability with Central Bank optimistic will not hurt economic growth as earlier projected.

Experts had earlier anticipated that the continued volatility would hurt the economy that grew by 7.0 percent in 2014, higher than the initially projected 6.0 percent.

The money market recorded the highest depreciation in two decades with the dollar selling at Rwf 800 from Rwf 704 in February in the last two weeks before the Central bank intervened to stabilize it at Rwf 755.

The volatility according to central bank was as a result of speculators which resulted into a rush for the dollar that resulted into an ‘artificial scarcity’ thus pushing high exchange rates.

“People rushed for dollars expecting an increase and this affected the exchange rates,” said John Rwangombwa said during the Media training for Economy reporters organized by Central Bank.

The Central Bank says that with strict measures that saw a clamp down on speculative behavior by cash traders thus stability of the money market cushions the economy.

Rwangombwa said that interventions and increased communication with cash traders continued to contain the speculation thus stability in the exchange rates on the market.

“We increased intervention in volumes and frequency in a bid to contain the speculative behavior from cash traders,” he explained.

The governor noted that the speculation that resulted from exchange rates volatility in neighboring countries was also facilitated by lack of information by the public, something that ignited the rush for dollars.

“When people learn what is going on in the economy, they act faster,” he said challenging journalists to inform the public about the economy to help it take right decisions.

 

About the author

Olive Ndaka is the Junior Editor for RwandaEye. An investor and young entrepreneur, she is a quick learner and has contributed many articles for RwandaEye in Kinyarwanda.

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