Skip to main content

Deflation: Why the Central Bank Won't Use Foreign Exchange Reserves


 According to the governor of the central bank, John Rwangombwa, this is the first time in twenty years that Rwanda has registered a depreciation in the double digits, with an aggregate sum that is currently greater than 12 percent. In the first half of 2023, the Rwandan franc experienced a depreciation of 8.8 percent versus the US dollar. This occurred despite the fact that global economic challenges are still having an impact on Rwanda's foreign trade.

The country of Rwanda has seen its trade imbalance continue to grow over the course of the past several years, reaching recent estimates of 23% in the time period under consideration. The difference between import and export was used to compute the trade deficit. This difference was derived from an increase of 18.5 percent in import bills in comparison to a rise of 11.2 percent in export revenues.

On the other hand, the NBR's international reserves have reached a level that is higher than the benchmark, which is 4.4 months of planned imports of goods and services worth of goods and services. Rwangombwa noted that the first aim of reserves is not to buffer depreciation because it happens based on the state of the market; rather, it is kept exclusively for emergent instances. 

The recovery of domestic industries such as manufacturing, construction, and commerce led to an increase in the demand for the dollar, which continues to play an important role as a significant means of commodities exchange globally. As a result, the value of the dollar increased on the international stage.

While many people would ask why the central bank does not use the reserve to restrict the depreciation, Rwangombwa stated that the initial purpose of reserves is not to buffer depreciation because it happens depending on the state of the market. "For example, during the Covid-19 period, we went from selling four million dollars per week to fifteen million dollars per week; that was an extraordinary situation." "In order to keep the market operating normally, we were forced to use some of the reserves," he explained.

Rwangombwa went on to say that even during this time period, "We increased the supply a little bit to around 10 million per week." The most recent data from the central bank indicate that the value of the Rwandan franc decreased in comparison to other major currencies. This includes a decrease of 13.9% against the pound, 10.7% against the euro, and a lower appreciation of 0.4% against the yen, after respective appreciations the previous year.

Within the area, the currency strengthened by 5.1 and 10.0 percent against the Tanzanian and Ugandan shillings, respectively. On the other hand, it appreciated by 4.5 percent against the Kenyan shilling and by 20.2 percent against the Burundian franc. However, the Swiss franc actually increased in value by 1.3% due to high domestic inflation exceeding the effect of weighted international inflation and nominal effective devaluation combined. This caused the Swiss franc to gain value in real terms.

Labels:

Comments

Post a Comment

Popular posts from this blog

Len Kowalik Obituary, Resident Of Vineland Ontario Has Sadly Passed Away

  Len Kowalik Obituary, Death - Vineland, Ontario was lucky to have Len Kowalik as a resident. Many people looked up to and respected him. Len left this world on October 12, 2023, when he was 57 years old, and his passing has left a profound void in the lives of everyone who had the privilege of calling him a friend. Len Kowalik made his entrance into the world on March 18, 1966. He never left the town of Vineland, which is located in Ontario, and throughout that time he was able to forge deep connections to his birthplace. Because of his friendly nature and generous heart, he was much liked by his family, friends, and the people who lived nearby. Because of his warm demeanor and willingness to assist others, Len quickly became an essential part of the Vineland community. Throughout his whole life, Len devoted his efforts toward making his community a better place to live. He contributed a significant amount of his time as a volunteer at the neighborhood community center and assist...
Post a Comment
Read more

6 tips to make money online in 2023

These days, a lot of people try to find quick ways to make some extra cash on the side. Increasing your monthly income or starting a new career can be accomplished through a variety of online opportunities. Here, we'll discuss both immediate and long-term strategies for generating income online. Determine the most appropriate option given your time and resource constraints. 1. Start An E-Commerce Business If you want to start a successful company, you need to identify products or services that you're truly interested in selling. Next, arrange the logistics at a table. You can build your brand gradually rather than all at once. You can also join the growing number of people who have found success with the drop shipping business concept.  In a nutshell, your role is that of an intermediary between the customer and an external provider. You won't need to have any supplies on hand because they'll handle order fulfillment for you. T-shirts, mugs, and additional merchandise c...
1 comment
Read more

Christian Hopper, NC Central student faces rape, kidnapping charges in connection to on-campus sexual assault

On Wednesday morning, NC Central issued a warning on a lady who had been the victim of sexual assault in the Benjamin Ruffin Residence Hall the previous night. A student at North Carolina Central University was taken into custody on Wednesday and is now facing accusations of rape as well as kidnapping in connection to a sexual assault that took place on campus. The victim said that the suspect sexually attacked her between the hours of 1:00 and 2:00 in the resident hall's bathroom. The incident allegedly took place between those hours. A student at NC Central named Christian Hopper, who was 18 years old, was taken into custody by NC Central police. The victim of the sexual assault was another female student at the university. According to the NC Central police, the suspect and the victim were familiar with one another. Hopper, who is originally from Charlotte. Hopper has given the impression to the police that he is a first-year student majoring in business who works as a barber on...
Post a Comment
Read more