Rwanda gets green light as total assets hit Rwf2.6 trillion
Written by: George Kalisa
Friday, November 10th, 2017, 11:00
Economic uncertainty and speculation that stemmed from the slowdown in the first quarter are finally laid to rest as latest financial report shows startling results of the Rwandan economy set forth by rising economic growth, stability of Rwandan francs against the dollar and easing of Rwanda’s trade deficit.
The report issued late September further points at improvement of the capital adequacy ratio [the bank’s capital in relation to weighted assets and current liabilities] and rise in banks assets and drastic fall in inflation.
The report attributes the upward trend and impressive economic reforms to macro-economic stabilization and structural adjustment which led to controlled inflation and an improvement of the import bill against the export receipts. Notably, the rise in Rwanda’s economic growth rate between the First Quarter and Second Quarter of 2017 more than doubled.
At the economic growth rate of 4.0 per cent Rwanda’s economy has performed far above the July IMF forecasts for the world economy at 3.5 per cent in 2017 contrasted with 3.2 per cent recorded in 2017. And, Rwanda’s economic growth still stands far above of Africa’s economic growth projection of 2.7 per cent from 1.3 per cent in 2016.
Economic gurus at the National Bank of Rwanda say the Rwandan economic growth hit 4.0 per cent in the Second Quarter of 2017 up from 1.7 per cent and 7.5 per cent in the First Quarter of 2017 and 2016 respectively. They cite improvement in the performance of the agriculture and service sectors. Long spells of droughts had particularly adversely affected the agriculture sector last half of 2016 and the first quarter of 2017; yet the sectors claims a bigger share of Rwanda’s exports [tea, coffee, horticulture and fruits].
And, the ease of the inflationary pressures and stable Rwandan franc exchange rate that are a byproduct of the implementation of an accommodative monetary policy stance by the central bank (BNR) effective December 2016 no doubt increased the appetite of all actors in the economy hence the increase in domestic production. As a result the economy recorded 11.0 per cent rise in broad money in the first eight months of 2017 against 3.0 per cent year-on-year. During the same period, the report indicates that outstanding credit in the hands of the private sector went up by 8.8 per cent from 10.6 per cent while new authorized loans grew by 4.1 per cent contrasted with 11.5 per cent in the same period in 2016.
Both demand and supply forces are expected to remain mute, the report says hence inflation is expected to be on the downwards of 5.0 per cent.
Remarkably, the ease in exchange rate pressures - Rwandan franc exchange stabilizing against the USD with a depreciation rate at 1.8 per cent between December 2016 and August 2017 compared to 8.0 per cent in the same period is attributed to rising commodity prices, increased domestic production of some items like cement. The latter is a result of the completion of huge construction projects that had inevitably kept the import bill very high.
Other impressive indicators of the rebound of Rwanda’s economy include increase in the assets of the financial sector in the Second Quarter of 2017 and in the profits of banks and insurance companies in the First half of 2017.
Total assets of the banking sub-sector shot up by 13 per cent in June 2017 to Rwf2.6 trillion. This implies increased liquidity in the country with liquidity ratio clocking 39 per cent at the end of June 2017 compared to 20 per cent minimum prudential requirement.
By and large, since economic growth highly depends on macroeconomic stability- controlled inflation, decline in import bill versus increment in export receipts, stabilization of Rwandan francs against the USD and increased liquidity among others, Rwanda’s economy is likely to perform above the earlier World Bank projection of 6.2 per cent.