Home BusinessBanking Rwanda: Central Bank Maintains Key Repo Rate at 4.5% to Encourage Lending

Rwanda: Central Bank Maintains Key Repo Rate at 4.5% to Encourage Lending

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The central bank has maintained its key repo rate at 4.5 per cent aimed at encouraging continued lending to the private sector to support economic recovery following the Covid-19 pandemic which has caused economic slowdown.

This followed the quarterly Monetary Policy Committee (MPC) meeting, held on Wednesday, November 11, to review recent economic developments globally and nationally as well as potential interventions.

The key repo rate is the maximum rate at which commercial banks invest their money at the central bank. The rate was first reduced in April this year from 5 per cent, a move aimed at increasing capital flow in the market.

The central bank noted that the pandemic had seen Gross Domestic Product decreased by 12.4 per cent in the second Quarter but indicators point to improved performance in the third quarter as economic activity picks up.

According to a statement signed by John Rwangombwa, the Central Bank governor, total turnovers of industry and services sectors have begun improving but are still below last year’s levels.

For instance, industry turnover for the third quarter grew driven by demand in construction material spurred by construction of schools, healthcare centres and roads among other infrastructure projects.

The service sector on the other hand continues to bear the brunt of the pandemic but contraction eased slightly in the third quarter as more services resume.

The central bank noted that following the accommodative monetary policy stance, the average lending rate had reduced slightly to 16.31 per cent which is expected to further support economic recovery.

Inflation stood at 9 per cent in the third quarter of 2020, higher than the central bank’s desired levels out of the effect of the transport price shock.

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