Rwf120bn kit to shore up Franc – BNR

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The National Bank of Rwanda (BNR) has set aside over Rwf120 billion approximately $300 million for the local forex exchange market in bid to shore up the franc.

The intervention is intended to smoothen the volatility of the currency market to protect the franc against foreign currencies.

“When there is volatility in the currency market, it is not good for the private sector, we come in to mitigate the unpredictability,” says the central bank vice Governor Monique Nsanzabaganwa

“The currency trade is market driven, we monitor the currency market variations, and when we see a gap, we sell to the banks, but it also comes with necessity and now its necessary,” she further noted.

However, Nsanzabaganwa said the depreciation of the franc against the dollar should not cause panic in the market.

The forex line will be sold to the commercial banks in the current financial year.

The economy registered a decline in export receipts by 1.9 per cent in the second quarter of this year, widening the country’s trade deficit by 12.14 per cent.

The franc depreciated 6.1 per cent against the dollar in 2013. This together with the aftershocks of the aid cuts affected business with some currency dealers folding up.

The central bank predicts the depreciation rate to rise to four per cent by the end of the year, but with the current acute shortage of dollars in the currency market, the rate is likely to increase.

At the end of last year, the dollar was trading at Rwf680 and on January 1 it rose to Rwf682. Today, the greenback trades at a staggering Rwf700.

From 2011, there has been an almost 20 per cent increase in the cost of the dollar against franc.

Forex bureau dealers say the dollar scarcity is affecting their business.

He noted that foreign currency sales to commercial banks by the central bank, does not normally affect any change.

“The forex sold to commercial banks does not trickle down to us, it doesn’t change anything, they use it for their client withdrawals, even when they sell, they sell to a few forex bureaus,” he said.

He added that the high volumes of imports and the high charges on dollar withdrawals by commercial banks are partly responsible for this scarcity.

 

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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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